Q3 2022 Expedia Group Inc Earnings Call

Well no telephone keypad, if you change your mind. Please press star followed by two to cancel your request for opening remarks, I will turn the call over to SVP corporate development strategy and Investor Relations Harsha Bash. Please go ahead.

Good afternoon, and welcome to Expedia group's earnings call for the third quarter of 2020 do that ended September 30.

I am pleased to be joined on the call today by our CEO , Peter Kern and our CFO Julie Whalen.

The following discussion including responses to your questions reflect management's view as of today November correct. When you really do only redo.

We do not undertake any obligation to update or revise this information.

As always some of the statements made on today's call are forward looking typically preceded by words such as we plan. We expect we believe we anticipate we are optimistic or confident that or similar statements.

Please refer to today's earnings release, and the company's filings with the SEC for information about factors, which could cause our actual results to differ materially from these forward looking statements.

You will find reconciliation of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on the company's Investor Relations website at IR Dot Expedia group Dot Com and I encourage you to consistently visit our IR website for other important information.

Unless otherwise stated any reference to the expenses excludes stock based compensation and with that let me turn the call over to Peter.

Thank you Laura good afternoon, everyone and thanks for joining us today before we get started with the update on the quarter I'd like to formally welcome our new CFO Julie Whalen to her first earnings call I am excited that jewelry to our leadership team during our 10 years as CFO at Williams Sonoma helped drive significant growth in the business.

And in shareholder returns I've also worked alongside Julie on our board since 2019, and she has chaired our audit committee since 2020. So she comes with a great sense of our strategic priorities and what we're trying to achieve our forward through the expertise you can bring to our finance org and across our entire company.

Now moving on to the quarter, we were very pleased with our record breaking performance in the third quarter, we delivered our highest ever quarterly revenue and adjusted EBITDA, The latter exceeding $1 billion for the first time in our history. We also delivered record third quarter lodging gross bookings. Despite some macroeconomic uncertainty in some short term impact from Hurricane Ian traveled.

Demand has remained strong and <unk> remains substantially elevated relative to pre pandemic levels.

This quarter. We also further de Levered, our balance sheet, which put us in a position to resume buying back our stock, which we continue to believe is highly undervalued going forward, we expect to continue to reduce leverage and return capital to our shareholders.

Now moving to the <unk> side of our business as we've discussed before our goal is to use great product innovation and unmatched membership benefits to drive more engagement with our customers and ultimately higher lifetime value from those customers and the two biggest drivers of lifetime value are improving loyalty membership and app usage and <unk>.

Good to announce that in Q3, we reached an all time high in active loyalty members, surpassing 2019 levels in August new Expedia customers that became loyalty members in the quarter grew by nearly 50% versus third quarter 2019.

And the rollout of our unified loyalty program <unk> is on track for next year, which will be a big catalyst for continued membership growth.

Our app downloads continue to be strong as well, but even more important to download. The app usage is at an all time high with quarterly active app users, increasing nearly 40% versus 2019 and in the quarter. We continue to see almost two thirds of all gross bookings result from direct traffic.

And to build the best customer experience, we can with the most customer benefits to drive loyalty and Consumerlab among.

Among our recent successes, we have introduced exciting new product features including price tracking trip boards and smart shopping all of which are designed to engage customers to inform customers and to ensure they are finding the right product at the right time at the right price.

So just to remind you.

Our flight [noise].

Excuse me our flight price tracking feature which we launched earlier this year has been a great engagement tool.

Since launch we've seen exceptionally high notification open rates, which demonstrates the value that our customers see in this tool is features currently live on our App in the U S and it's on track for global World rollout in the first quarter of 2023.

In Q3, we launched reports on brand Expedia, where users can save their favorite lodging and activities and share and collaborate on trip details.

Feature not only increased converging, but has helped us expand our base of customers through sharing with family and friends and the first two months since it's broader launch we saw a trip board users have twice the repeat visit right. They were twice as likely to purchase multiple products and most importantly, they transacted at four times the conversion rate versus non users.

And as for Smart shopping, which is a tool that really helps travelers comparing in choosing between available rooms for a given property.

We began leveraging machine learning recommendations to better match, our customers with the right product and options. This has led to better consumer outcomes more premium product sales for our partners and ultimately higher value transactions for us.

In addition to these new features during Q3, we finished the migration of the hotels dotcom front end onto the expedient platform, which allowed us to accelerate our optimization programs across our entire conventional lodging portfolio. While we're just getting started the ability to test them deployed faster across one platform is already driving higher customer conversion.

Better customer experience and improve sign up to our loyalty program.

So overall, we've seen a great reception from customers on these new features and benefits and for US. It has led to increased engagement better conversion and higher revenue per customer.

Really excited about the success, we've seen so far and we have a bunch of new features in the pipeline and a terrific opportunity to roll out all of these features worldwide.

Moving on to the beat of beef run we remain bullish on this massive opportunity and excited about are expanding role on the travel ecosystem everything we are doing on the main technology stack for our be this new products will of benefits that in Europe to that would be the <unk> business as well as a ton of work. We are doing specific to the <unk> business that will lead to new products New partners in new revenues.

Dreams.

In the third quarter be to be continued to demonstrate success with growth across our key product lines as we one wallet share with many of our existing partners driven by our expanded capabilities and an improved product offerings.

As excited as we are about the momentum in our existing business, we continue to build pilot and deploy new products and services for our open world platform.

This quarter, we signed the first pilot partner for our best in class fraud prevention product and next year, we plan to continue to deliver more new commercial products and services I'm really excited about what's on our roadmap for me to be in the reception, we've been getting from the industry.

So to sum it all up we delivered another record quarter of results rolled out more product features and member of benefits and continued to add significantly to our member base and our app usage, all of which will be.

Be great for our future performance and build the base that we are looking forward to grow in the future. So all in all we're feeling really good about our progress not least evolved because of the phenomenal team of people, we have assembled to drive all of our acceleration and with that I will pass it off to one of our newest Julie.

<unk> second line and excited to be here and to be a part of the team as you may or may not know in in the foreign here since 2019, I had the opportunity to develop a great deal of respect and admiration for the leadership team and Nick restaurant accompanying executing against and I know there are significant opportunities across the profitability half and I look forward to helping the company.

<unk> growth initiatives and to maximize shareholder.

As it relates specifically to the third quarter. We are pleased to see the continuing on mentioned in our business, resulting in revenue and profitability to levels, we haven't seen before which clearly speaks to the early success, we are seeing without initiatives to drive long term profitable growth.

As far as the details regarding our financial performance for the quarter similar to previous earnings calls I will discuss our revenue related and adjusted EBITDA growth metrics, both on a recorded and like for like basis.

Like for like growth rates excluded contribution from Acampsia Amex GBT in a non latching elements of our changing relationship.

And as a reminder, on November 1st 2021, we completed the sale of a chancy and our EPS business entered into a 10 year lodging supply agreement with Amex GBT we.

We believe these like for like numbers are helpful. In assessing the performance of our business.

And it's also important to note that our third quarter growth rates as compared to 2019 were negatively impacted by FX headwinds of approximately 200 basis, but points because bookings and revenue in 300 basis points to adjusted EBITDA.

Moving onto the grass booking trends in the quarter total price bookings were down 11% on a recorded basis and down 2% on a like for like basis versus the third quarter of 2019.

Total gross bookings for the quarter were impacted primarily by the industrywide slowdown we saw in early July . However, since early July we saw trends meaningfully improve primarily driven by lodging bookings growth our largest line of business with continued ADR strength.

Total lodging gross bookings, which are the highest Q3 on record earned 5% on a recorded basis and grew 7% on a like for like basis versus Q3 2019.

The cadence throughout the quarter was consistent with the trends in total price bookings.

Lodging gross bookings unreported basis was down 1% in July and the rest of the quarter rebound up 9% in August and up 6% in September which was impacted by hurricane and.

October was also impacted by the hurricane but was still at approximately 5%.

If not for the Hurricane plus September October would've been relatively in line with August .

Overall, we are pleased to see strong demand expand into the fourth quarter as consumers continued to prioritize traveled spend over other discretionary spending.

And while it is still early in the quarter. We are seeing total lodging bookings for stays expected to occur in the balance of the year and into 2023, continuing to outpace 2019 at levels.

Moving to the key financial metrics in the P&L, starting with total revenue revenue of $3 6 billion was up 2% on a recorded basis and up 5% on a like for like basis versus Q3 2019.

It was great to see another quarter positive in sequential improving revenue growth.

Ah revenue margin also improved to 15% for the quarter are up approximately 190 basis points versus Q3 2019.

Revenue strength resulted from a mix shift towards our lodging business, including our higher AVR per about business.

Cost of sales in the third quarter was $451 million, which was down 17% versus 2019, driven by cost reductions, primarily resulting from our divestiture of magenta, yet and from ongoing efficiency is across our customer support operations, resulting from the automation initiatives, we have been implementing over the past couple of years.

Direct sales and marketing expense in the third quarter was one $5 billion, which was up 8% versus 2019, which includes spanned over the longer term return profile to drive more profitable future growth.

As a reminder, we are focused on acquiring high lifetime valued customers. As a result, we are allocating more marketing dollars on channels that have a longer term return profile such as brand awareness loyalty and paid App installed which is Peter mentioned are already beginning to drive growth and loyalty members an app usage.

Our sales and marketing expenses also impacted by an increase in commissions paid to our partners, which is a direct reflection of accelerating growth. We continue to stay in our core <unk> business.

Overhead expenses for $569 million down $144 million or 20% versus the third quarter of 2019, we.

We continued to remain disciplined on our cost structure and are always looking for ways to drive more efficiency overhead expenses slightly increased from the second quarter, approximately $19 million or 3% primarily associated with our ongoing focus on investing a top talent cross our product and technology teams to help accelerate our various platform initiatives, which we believe will ultimately draw.

Feature top line growth and margin expansion.

These results with another quarter of strong revenue and expense disciplined allowed us to deliver our highest quarter profitability on record.

Suggested EBITDA grew 18% versus third quarter of 2019 and grew 20% on a like for like basis to $1.1 billion.

The adjusted EBITDA margin with nearly 30% and expansion of approximately 420 basis points over the third quarter of 2019 on a reported basis.

Free cash flow with negative one 2 billion in the third quarter and over $200 million improvement over prior year due to higher EBITDA levels as.

As a reminder of the third quarter as a negative free cash flow quarter due to the seasonality of the business here.

Year to date are free cash flow remains strong and a positive $3.1 billion more than double where we were year to date in 2019.

On the balance sheet, we ended the quarter with strong liquidity are seven $1 billion from both are unrestricted cash and our undrawn revolving line of credit, which provides us with ample access to cash to operate the business.

This quarter, we continued to focus on Delevering, our balance sheet, improving our leverage ratios and solidifying are investment grade rating as a result in September we redeemed an additional $500 million of our senior notes as part of a tender offer resulting in a total repayment of debt and preferred equity of $3 $4 billion over the last 18 months.

These balance sheet actions, along with our significant growth and adjusted EBITDA has enabled us the additional flexibility to begin returning capital to shareholders Ken.

As such we repurchased approximately $200 million or 2 million shares through October and have approximately 21 million shares remaining under our existing authorization for future repurchases.

As we move forward given our strong liquidity our confidence in the business and the fact, our stock continues to be highly undervalued, we expect to further delever the balance sheet and continued returning capital shareholders in the form of share buybacks.

In summary, our third quarter results demonstrate some of the early wins, we're starting to see from the transformation of the business and the success of our strategic growth initiatives.

These early wins give us confidence that there was a huge opportunity in front of us to drive long term profitable growth and to maximize shareholder value.

And I couldn't be more thrilled to be a part of this company and its leadership team as we unlock the significant opportunity for growth together.

And I look forward to getting to know all of you in the travel investment community and.

And with that I would now like to open the call for questions. Thank you.

Thank you as a reminder, if you would like to ask a question today. Please press star furnished by one <unk>.

Keypad and he would like to attract your question. Please press staff, but it might change all of.

<unk> questions <unk> Alright. Please go ahead, you want anything <unk>.

Thanks, So much for taking my question or maybe two if I can first in terms of the broader and demand environment. I think there continues to be a lot of investor questions about levels of <unk> through the December quarter to next year or elements of how you're thinking about the booking windows more broadly since you can give us a the way you were thinking about.

You see in the business today against elements, so potentially more volatile macroeconomic environment as we move into next year that'd be number one in and appreciate all the color on the capital return are there any guard rails, we should be keeping in mind. The realm levels of gross dead or did you want to sort of keep front of mind for investors in terms.

What my balance Prudence versus capital return over the over the next couple of years. Thanks, So much.

Thanks, Sir I'll take the first part first.

I think this is consistent with a lot of work you've heard from the travel industry over the last couple of weeks based on what we've seen but there really hasn't been any material signs of fall off in demand or.

Or for that matter in the world there is a little bit of geographical mix change.

Apacs sort of coming back now with the opening of Japan, and a few other markets.

So there's a little balanced shift issues are there could be a dr change because of mixed for certain players, including us, but but there has been no no real wet up an AVR and there has been no real let up and demand we still see pay.

Pacings for the rest of this year and next year.

Considerably above where we were in 2019, so I think there's a lot. We all think about and watch the N b C or whatever but so far there is really no evidence to suggest there is some bigger.

Bigger macroeconomic thing happening.

And as far as capital allocations I would just say that first of all we are pleased.

Pleased that we're in a much stronger position that we've been in the past we've seen improving profitability. Obviously I mentioned that we at record levels with EBITDA. This has enabled us to generate strong cash flow strong free cash flow has enabled us to delever more on the balance sheet and resume our share buyback program, which we stopped for a little bit.

And so going for giving us strengthen our position.

Certainly this enables us to continue to Delever and buyback more stock, which we think is the right thing to do certainly by Delevering on the balance sheet and Fortifies, our investment grade rating and gives us more flexibility to be able to return more to shareholders, which we think is the right thing to do is certainly given the fact that we are very confident in the future growth of our business.

That our stock is highly undervalued and we are strong liquidity and we have 21 million shares remaining on our existing shared purchase authorizations do vivax, though obviously with that in mind, we think it's the right thing to do going forward.

Great. Thank you.

Thank you.

Thank you and the next question <unk>. Many people ahead. Your line is open.

Yeah. Thanks, a lot a few questions. So plus maybe just on the expense side of things given.

Given the uncertainty macro helped me thinking about growing the fifth.

Over the next 12 months old months or so.

And then maybe just from the another sort of macro question are you seeing any kind of.

Zoom on demand shift in terms of the trade balance or maybe you can do and so I'm looking to.

Let me drive to her since my Blue kind of.

<unk>.

Yeah. Thanks.

So on the expense side I would say it's.

Julie mentioned, we've been trying to hold the line pretty clearly obviously, there's been inflation over the last few years, particularly in people.

And we've certainly invested in people to build all the technology that.

We want cetera, but as I've also mentioned before we see plenty of opportunity ahead to become more efficient. So we will keep a pretty tight.

<unk> on on fixed expenses going into next year and again as technology delivers we think there's lots of opportunity to continue to become more efficient. We think we can drive growth certainly without.

Much more fixed investment and there's more opportunities for efficiency than there are for increased investment. So we are pushing hard to get across the line on a number of technology fronts, we have.

We built up in some cases capacity human capacity to do some of that work.

But overall, we think that the general directional move towards greater efficiency. So.

Will hold the line, but we expect longer term more efficiency coming out of the business.

And then as far as the Austin ask question about consumer demand.

The answer is no we have not seen draped down so we have not seen.

We have not seen any major moves shifts and.

Demand patterns.

Obviously, putting hurricane decide which is the largest people and things like that.

It's really been a very steady very strong demand fixture.

As you know we've been we've been differently selective about the about the traffic and the consumers were looking to get and how we're building them up into longterm valuable customers, but overall macro demand seems quite strong spillane and as I said the <unk> for next year strong so.

Laughter there'll be filled in next year, but but so far we haven't seen any of it.

It could be.

Yep.

Thank you and the next question <unk> Deutsche Bank can you. Please go ahead your line is open.

Great. Thanks, maybe one the onset of the market and we continue to see that deleverage little beds, a quote unquote.

G as a percentage of Brookings give me your best friend some longer David Ottawa in that sense. I guess my question is what's your time frame should we be thinking about it.

To see the ROI on these investments.

And.

<unk> <unk> <unk>.

The emission of that you've taken across the whole of the Muslim organization can drive luggage longer term play themselves.

Yeah.

Yeah. Thanks.

So I think the answer to that is we are already seeing benefit but we are also investing more benefit back into long term ROI, so you're sort of not seeing the net benefits if you will.

But as we believe that as we build that base of customers as I mentioned or.

Membership basis now are active members. If there is no higher than it's ever been and growing faster than it ever has or.

Usage likewise.

And that all gives us the ability to build more direct traffic, which gives us the ability to invest in driving more direct traffic no. Those lines will start to separate over time, and we will get we believe the margin expensive than the incremental leverage but right now we're still we've still been rebuilding the bucket to drive.

Use this base of high LTV customers to drive as much or more.

Demand that we used to get just by buying traffic out of the marketplace and having them be non members and anonymous customers. So.

It's really a transition we're going through we think that separation will come.

But we are continuing will continue in the fourth quarter to invest in these longer David return opportunities like apps et cetera. So we think will continue to do that we think we're already seeing it but it's hard to see from the outside you will see the separation over time.

As we continue.

Continue to build that base of members higher and higher and higher.

And then as.

To your question on.

On.

More broadly how that affects us I guess going forward I think we will watch that we will put the money back in but we expect to see expanding leverage in this as we go forward I would just add that we have the loyalty program <unk> Rolling out next year that will expand loyalty to memory, many customers who weren't in the program before we think that's going to drive it.

A lot of business, but it will again drive a little bit of noise.

We try to help you figure out where the leverage is so just fair warning like it's a great opportunity, but but in terms of like this linear road, it's going to be a little bumpy as we roll some of these things out and we will help you understand those as we go.

Under some helpful. Thank you.

But.

Thank you and the next question Guy she kept in a couple of <unk> Kevin Kevin. Please go ahead. Your line is a pain.

Thanks, I appreciate it a couple of quick follow ups.

Could you could you give a little bit more color and how you're thinking about the the one key launch and the type of.

Investment that will be needed in that launch.

For next year, and and also as you look thinking about apt.

Downloads and longer term.

Or or longer dated returns on those channels.

How long is that when you are acquiring new customers through through that channel is it is it six months is it a year how are you thinking about that thanks.

Yeah, I'll, maybe take those in reverse Kevin.

On the on the when we when we think about LTV, it's over a longer horizon. It's usually 18 to 24 months. So we're not.

As you all know travel for many people is not.

Times, a year kind of thing that can be a twice a year once a year kind of thing. So it does take a little longer as I mentioned before for some of these LTV.

Investments to return, but that's how we think about that timeline is we're sort of normalising. It over more like an 18 to 24 month period as opposed to six months or something like that.

And that's really the tradeoff, you're making in many cases is buying that very short term intent perhaps unprofitably.

Versus buying long term intent and long term LTV, but it takes longer to pay out so.

The trade with making with a portion of our investment is not everything obviously, but we have directed money that used to be in that short term intent bucket into these longer term buckets. So.

So that's why it takes time, that's why we didn't pivoted all at once because it takes time to build those customer basis that are those ILC customer bases better than paying out at higher levels than the short term intent that we used to buy so that's that's how we think about that it's a balance and we're constantly balancing it as far as <unk> goes.

We will launch next year, we will incorporate bravo customers among others into the plan, we will try to move customers who are in other brands into the brands.

That have loyalty so everything we want everybody in the loyalty bucket.

Value as you know we've had many different plans of many different values, we will normalize around one single value for everything for the currency and we think we've settled in a place that will be very good for the customers. They are gaining flexibility. They are getting the opportunity to use use the value on all of our products, which is how.

Billy valuable and we know they want it.

And yes, we will have more customers and that based so we would expect that basically grow over time, but the short short term movements will be sort of the movements between putting verbal customers into the base of changing some of the platform of like the hotels dot com platform of stamps platform into a points.

<unk> for them and so forth and so there'll be some short term.

Puts and takes but over time is something we think will grow at a at a rational it's not going to spike to some crazy number it's not going to shrink.

But it's going we're going to.

Take that capital deploy a better across our entire customer base and then hopefully if it's successful which we believe it will be it will continue to build on itself and more people will join and we think the economics of that are very attractive.

Great. Thanks.

Yep.

Thank you and the next question <unk> Deepak Pizza had your line is a pain.

Hey, guys. This is jacqueline for Deepak Thanks for taking my question.

Talk about real quick just providing any maybe high level said you guys are seeing their how it came out of the summer travel season, maybe expectations into the holiday season, and then sort of related there as well any treads and a dr.

<unk>. Thanks.

Yeah, Thanks, Sir I think.

Our broad comments hold for Bobo as well we.

We haven't seen a lot of AVR pressure.

Or anything that's really noticeable avr's, we've held up very strongly and.

Holiday demand has.

Strong and facing well we did see disruption. We are you know we have a pretty good pace business in south, Florida and hurricane.

Did some damage, which monkey with our September and October .

Report results, but.

And we think by now most of that it's never 100% will get replaced and the other other properties and other spots. So there's a little bit of overhang from losing that supply for a little bit of time.

But in general we're pushing much harder into growing supply now again.

We are seeing Adr's holdup, and so for the business.

Broadway remains strong again, you will see pockets of change as the world evolves as certain as APAC opens up versus.

Versus.

Maybe we all worry about me its economy or something there may be shifts slightly but broadly we have not seen anything.

That is affecting the overall business.

Great. Thank you.

Yeah.

Thank you and the next question guys seem to like <unk>.

Oh P B S.

So how's your line is a pain.

Great. Thanks have wanted to go back to the rollout of.

Graded loyalty program and just understand the short term tradeoffs versus the longterm payback to the extent you feel like you have visibility on and just thinking back to the last time, we saw that in 2011, and 2012 scaling up expedience loyalty program and globally, expanding the hotels Dot Com pro.

Graham.

It seemed to drive a headwind to revenue take weight.

And so with worry about not having a program prior to this it would seem like it could be a take great headwind in too.

23, so what what kind of magnitude should we think about on that side and then how long will it take to get that to a state where you can sort of wind back the marketing spin and <unk>. The the benefits of the rewards of that loyalty program.

On the positive side.

Yeah, Thanks, a lot.

Think the way, we think about it as we were going to balance of what we think of our portfolio of tools, including loyalty regular way marketing.

Discounting and other tools, we use to to drive sales, we think of that as one pool of capital that we're investing to drive.

Award next year's results and so there are some things happening, including the ramp up of loyalty that we are balancing against other types of investments. So there is a little noise potentially as you pointed out between tape right, which is the contra revenue stuff above the line versus.

Conventional sales and marketing below the line, but from our perspective, we look at it is one four capital and we are trying to balance the investment and driving that long term, we think that loyalty.

Of getting all of those verbal members then attached to our other brands and attached to our other products is going to drive it very nice results not instantaneous as you pointed out it's not like spending on.

It takes time, they they rack up points they wait for their next trip whatever.

But we think that's a big benefit in terms of expanding our basic customers spamming, our direct traffic et cetera.

So yeah, there will be some there may be some I guess I would say across the piano there may be some movement thoughts about him as a little more moves into loyalty, perhaps in something it gets taken out and some of the perhaps direct us and him spent but we are looking to balance that whole thing and as we get closer to it we will give you insight.

To have to think about.

Looking at the piano going forward, but in general we think we will balance it out it's just that there could be some <unk>.

Small movements as we light up the programs in certain certain programs could change from one brand to another.

There may be some balance sheet adjustments for approvals and other things noise like that but in terms of driving a real P&L in real cash flow.

We think we've got enough things to offset it in some other opportunities to expand margins of verbal that we can.

Pretty much absorb it and chew it up and other places again manage that balance as we go forward of driving these long term investments is against the short term loans.

Yeah that makes sense. It seems that you take regents below the kind of competitive environment.

For starters and that seems like one area and you could you could make up for it I don't know if that's that's one of the ideas.

I'm curious curious to anything you can share their thanks.

Yeah, I think we are under our competitors. We are we are thoughtful about how we want to deal with that.

For our.

Partners.

And for our consumers.

Volume tradeoffs with coffee.

You increase take rates as well so there's lots of things to balance, but we are looking at all of those things and have opportunities.

Alright. Thanks.

Yes. Thank you.

Thank you and the next question you guys <unk> of ethical ISI well can you go ahead you 99.

Thanks to questions. Please first could you just address the issue of whether there are materials sure ships going on in North America and the launching.

Market and then secondly, I think you just touch briefly in the last question or two on Asia Pacific to what extent.

Any color commentary on I think that's sort of the last.

Not chew to drop but you to rise so just.

What what that recovery path looks like for that region. Thank you.

Yeah sure Thanks, Mark I would say.

To address your first question some of what we saw in.

Let's call it the middle of the summer and I talked about some of this on our last quarterly numbers. We are we were moving platforms. We were doing a variety of things we were and pulled back on some discounting and some other things where the competition has been very heavy we've seen that normalize and we are.

We don't see if anything we think we're gaining ground.

But there hasn't been a continued erosion.

And I think you can see that in the relative growth rates, although again, we are still.

Being more selective about the business, we buy and everything else.

We are stable and and others have seen growth rates decline.

But so we think the U S is pretty stable to slightly in our favor and again, we believe that as we continue to build this basic business base of members, which is largely use driven given a relative strength in the U S that that starts to be a repeating underpinning of our business that drives us up as opposed to just buying.

The old fashioned way that that support the groundwork took place. So we think we're setting up quite well for that.

We like our position there obviously, we would have liked to not given up some free room nights, but not all room nights are valuable and not all room nights profitable.

And we don't view it as strictly a room that game. So we're setting up well and we like our position in that noise has definitely stabilized from from when we were doing all the platform transitions as far as APEC goes.

Wish you were a bigger part of our business is not a huge part of our business. We have a very nice to be to be business. There that's been.

Largely stifled by the closed.

APAC market so.

B C business <unk> business with like a lot like many parts of the world is much more internationally driven so even though there has been some opening Japan's opened up somewhat Korea.

China not yet.

It's been it's been more domestic travel then international International Airlift.

<unk> is still much more reduced than the rest of the world. So I think we'll see that come back I think you'll probably see some shift if if.

If europe's slows down you'll see Aerolift moved to a fact that payback is opening up and you'll see opportunities obviously currency will play a role and where people are willing to go and how far their their money goes in different regions.

Again, we think that's probably good for us being relatively heavy in North America, where the dollar is strong, but but again, we expect that to open up sequentially hopefully China will open at some point.

Coming year, and and we have a very good relationship with C trip and power of a lot of their outbound international travel. So I think there is.

There's opportunity for us, but that is the next shoe to drop we agree with that that will be the next rising tide as it were reversed.

Our stories and.

The rest of the world will see.

Thank you Peter.

Yep. Thank you.

Thank you and the next call.

Can you guys keep blind Fitzgerald of wireless fall day Bryan. Please go ahead.

Thanks, Verbal originally came with its own tech stack in a different value propositions.

The front end versus each comment makes fee but.

More leverage to begin their can we get an update on the progress of back in front of unification work and then.

It just seems Peter you mentioned trip boards, and smart shopping and air fare tracker. This may be stating the obvious.

The the rate of iteration, they're testing or innovation.

Is accelerating is that true now that you have more homogenized base of technology and tools and and should we expect more of the same.

Yeah, I mean, we're pushing and heavily into that I would segment. The last part to say, there's there's testing and optimization work, which is ramping up significantly right now and was what was sort of on hiatus in the middle of the year as we were moving hotels Dot com. That's now allowed us to be in a new position to rollout.

Innovation winters et cetera across a much wider base and to test across a much wider basis of our consumers.

Your first question Verboten Thats still on its own stack. It is next up it is literally going to start testing traffic on a single platform by the end of this year before the end of this year, but it will it will be a gentle we mean to disrupt as little as possible.

But that again will give us potential future innovation, the verbose stack and a verbal shopping experience is quite different thing than conventional lodging shopping I'm sure you're familiar so.

The ability to test the same types of winners across conventional lodging and verboten may not be quite as dramatic.

But there are a lot of cross cutting benefits like trip.

Trip planning potentially or check out our other things that will that will work for multiple products. So.

It's all on a journey there verbose to the next to go but I'd say the big benefit on the convention realizing side, we've gotten across and now we are starting to iterate significantly on and then the feature part.

Whether it's trip planning our flight tracking or other things that's really in other categories that that's like innovating into new ways of shopping new ways of sharing and collaborating and we think that's the future of the business. We think there hasn't been much innovation in the space, we want to lead in this space consumer.

Consumer adoption has been very good but of course, we've got to get it everywhere on everything and.

And we've got to keep going so we really want to differentiate on the product on the benefits of being a member including loyalty, but also pricing packaging and other capabilities.

All of that we think is what makes the product sticky.

We're doing a much better job of it now, but we will do a much much better job of it going into next year.

Thanks I appreciate it.

You bet.

Thank you and the next question. Thank you Anthony Paste of Bank of America Merrill Lynch. Anthony people had your line is 18.

Thank you a couple a couple of questions for you first Peter.

You look at traditionally we look at marketing to bookings and I think you're kind of arguing we should look at gross profit, which which is up since 2019. So can you just kind of help people understand how you are looking at your marketing spend maybe differently than the old management team and then Julia welcome aboard I think the stock has been under pressure theirs.

Been a little disappointment that some of the margin improvement that was kind of speculated on after the cost cuts in 2000 hasn't been as evident.

Is there an opportunity to kind of and maybe not on this call of course, but in the future give give some guideposts for long term margins for the companies to help the street. Thank you.

Thanks Anthony.

I'll take the marketing points, where it's at.

Speak to prior management I think it is slightly different though the point I mentioned.

About thinking of the whole pool of spend on customers.

Loyalty.

Direct marketing brand et cetera.

How we're looking at it now which was not entirely health looked up before these are all from our perspective ways to drive.

Drive transactions drive value.

And we're looking at that as a complete fool of spend so that's different and then yes. We think you have to look at it relative to GTE because.

Volume by room nights is not relevant right. It has to be a question how much GP, you're deriving either given transaction because ultimately GP is what turns into.

Into real margin into real contribution so we are.

You used to have a room that was 100 bucks announced to us or or take with 100 Bucks on a transaction announced 200 Bucks you're not going to bid. The same thing you would bid or invest the same thing you would invest to get 100 dollar transaction you'd be willing to invest more to get a 200 dollar transaction. So you have to look at it as GB, we recognize it's challenging for the outside world.

To know what are booked GPS, but we're trying to express to everybody that that is from our perspective, the right way to look at it you are investing a portion of your profits back into keeping the machine growing and and that is that is how we look at it. So I'd say the big differences are working at the entire pool not discreet bike.

Loyalty can be X, but marketing should be y or it's all about direct marketing as a percentage of revenue like that's not the right map from our perspective.

But we recognize that it makes it more complex to understand from the outside because books GP.

Obviously correlated to book a room nights, it's correlated other things, but there is noise.

Noisenik because most of us have air and other things floating through the.

Gross booking lines and it gets it gets a little confusing so.

But that is how we look at it that is how we think it's the right way to look at them as I've said a couple of times, it's all for us about balancing this journey into this long term investment pool without over indexing do it and giving up too much short term business.

But getting there overtime, because we believe it's absolutely the right answer too long term profitable growth with higher margins et cetera. So that's what we're pushing into and Thats.

We totally believe in that at all.

Hi, Anthony Nice to meet you regarding your margins comment obviously, that's something we're very focused on I mean, certainly in 2020 $1 billion cost out.

And that certainly was the start of our marching in front of you and if you look even through a clerk order today, where 30% margin, which is 491 hundred basis points over 2019 models and we're still holding.

Cost savings from renting wherever some slight movements here and there, but certainly even as Peter mentioned earlier.

We're all about still maintaining efficiency, maintaining a culture of strong financial discipline and certainly that's something that I look forward to bringing to the table as well as something in my track record some of the.

And we're going to continue to jail.

And drive that margin, even higher and certainly all the things that were done from a strategic growth initiatives perspective is all about driving profitable revenue and that's driving revenue at any cost and so therefore, we do expect to have margin expansion over time, I mean, setting a target.

You always difficult because then instead of targeting one even higher so I think at this point, we're just focused on growing that margin.

Okay, and as a result of our strategic initiatives.

Great. Thank you.

Thank you and the next question come champion of <unk> can you provide your line is Nathan.

Hi, good afternoon.

Peter.

Don't know if you could add any comments on the <unk> business.

The.

The opportunity there.

<unk> in the quarter was obviously very strong, but just any any highlights from your perspective and then.

Julie Likewise, it's it's great to speak with you. This afternoon I'm curious if you could just talk a little bit about what.

What attracted you to the to the to the role and the opportunity you're obviously familiar with.

With with the company, but.

Just just curious if you could elaborate on that and maybe your areas of focus into into twenty-three. Thank you.

Yeah. Thanks.

I'll go first.

I think <unk> been doing extremely well for us we view it as.

A tactical way to play in some parts of the World, where we don't play as in B C business, we view it as an opportunity to grow.

Grow grow our number of partners grow our wallets shares a reference and of course grow our product offerings and we've had.

Incremental improvement over the years as we've added things like our wholesale business optimize distribution, which is expanding quite well I mentioned, we grew out here. We have we have many new partners in the pipeline.

And we've acquired new partners, we don't.

We don't announce everyone, but it's a continuing expanding base. So we see a lot of really attractive opportunity. We think there are lots of pockets of demand out there that we have not yet reached in that are challenging to reach without going to those partners directly in those partners view us as extremely good unsaved partner in the.

Travelers base to go to because we can do everything.

We do it well and they get all the benefits of all our technological advances as we make them. So we think there's a lot of benefits in that core business and then as I've said, we've been pushing into this idea of externalizing more of our capabilities as Microservices. That's what our fraud test is about we will test many other things this coming year.

We're piloting them with different partners.

But it's a real opportunity for us to take our technological advances and bring them to the industry and help create greater efficiency.

Our partners running their businesses and then ultimately expand the universe partners, who can sell travel so that goes to social commerce and other things that have been talked about another industry, but we're really in a pretty unique position to do that.

At scale.

As we roll out these technical capabilities. So we're extremely both there.

We've expanded and improved our partnerships with many of our biggest supply partners through these kinds of technological relationships.

And we're we're feeling quite good about it some of this stuff is very early those new products are quite early days and they've gotta get perfected and rolled out and then scale, but that's the pipeline of the future and in the meantime, our core business and some of the more recent additions like.

Our wholesale business et cetera are expanding quite nicely and we continue to win business across the globe. So.

Feeling feeling really great about that business hi.

Hi Fi, it's really nice to meet you as well as.

As far as what attracted me to come here quite honestly.

The benefit of being on the board since 2019, and so because of that I was able to certainly be involved with the management team appear.

And also to these are under the covers thinking well with the strategic opportunities, but they were executing against.

And certainly course excellent financial capital allocation pumps, and things like that but really a strategic initiatives.

Was able to see that mainland transforming the business and some of the things they were doing or chest.

Game changers.

It happened actually at my previous company and once we had finished some of that really enabled business and take off in a big way So I knew the neighbor.

Hello point at the company to launch these changes and so I just thought there is tremendous opportunity.

Our growth and profitability at this company and I wanted to be a part of it.

As far as changes that could be coming down the wagging person far enough time, just trying to learn as fast as I can the details of the companies certainly.

The bigger picture.

That is not in the plans for any major changes shorter term, but certainly if you look back at my track record shall I mentioned earlier, certainly all about strong financial discipline driving efficiencies, making sure we're generating.

Investments.

Turns.

That we had a capital allocation policies that really payments are shareholders. So that's something that I'm certainly going to be behind.

As we move forward in emphasis business continue to outperform.

Thank you.

Thank you and the next question guys, Hey, Jonathan and Kaney Jeffries John Please go ahead.

Thanks for taking my questions.

So you've been pretty clear about prioritizing customer LPP in your marketing approach, but I'm curious, how you're thinking about the opportunity cost of losing out.

Central customers to competitors as they remain aggressive driving share gains in your car market and at some point does their aggressiveness necessitate a shift in marketing strategy towards some of those lower are wide channels in case, it's reducing your opportunity to attract high.

Higher value travellers and also to avoid the unintended impact of your pullback in those channels, helping competitors realize higher ROI, because you inadvertently reduce the competitiveness and the keyboard bidding environment and I have a follow up thing.

Okay.

A lot to talk about their but I would say.

At a at a high level, it's what I've said a couple of times now which is it's all you're right. It's all about balancing that right you are making a transition of trying to build a basic customers that actually what your product.

Have some benefit your product and we will drive longer term returns. There is a lot of traffic out. There every day I think the industry has proven for decades really that.

There is a mass of people that are up for grabs every day the challenge hasn't been buying them. That's just a question of how big a check you are willing to write the challenge has been keeping them and I think that's been true for everybody in the industry.

We're really invested as you can probably tell and making the product better, making the benefits better making people stick and making sure they get the benefit of being with us.

But of course, there's a balance to be struck and we're not suggesting we found the perfect balance, but we're we're moving across the journey, where we think we can get to a place where the the core base of long term valuable customers becomes a new threshold level that you're building on top of and we also believe is the product of groups and then.

We are better at getting people into membership and into experiencing the benefits that those otherwise cheap what's valuable.

Pieces of business that we've sort of a shoe during this period become more valuable to us over time in other words will be able to buy let's say met a traffic or other kinds of traffic more efficiently because we're better at keeping them and turning them into longterm customers. So those things are in flux all of the time and we are looking to optimize.

It all the time.

Not looking to throw business to the wild and let somebody else get it.

But we're also not willing to just the upside down at any price to buy traffic and pray so.

So.

It's something we're balancing literally every day and we're continuing the balance and as we plan for next year, we will continue to balance, but we think we're directionally right.

We won't be perfect, but were directly right on us as we continue to build up this huge base of members and reduce churn and include more of them through through the broader royalty plan. We think that's going to be incredibly valuable to us. So so we feel good about that trade, but your questions fair and we look at it every day and so.

We will keep looking at every day.

Thanks, I appreciate that and you mentioned some more opportunities to drive efficiency overtime.

Can you just use the outline some of the more impactful buckets, you have for incremental efficiency gains on the fixed cost side. Thanks.

Yeah, well I think it's twofold right, it's both growth driving faster growth, which is getting some of the benefit of the members et cetera that we've been stacking up.

These many months and into next year.

And having that expansion come through more direct business that we don't have to pay to get regain.

So that's what we pay through loyalty, but that's a much smaller cost to us so that that's a a big area of separation, where I think the margin will expand because we won't be paying incrementally all the time for the same business.

And then I think on the fixed costs, there's all kinds of efforts going on we haven't fully optimize the cloud, but we moved a lot of technology into the cloud, but we have a lot of work to do we're still synthesizing our data pools to be more efficient around data all of those things have knock on effects and costs in computer time and clouds. So there's there's a bunch of work going on there.

There's a bunch of opportunity as we move to this one platform to optimize better in every optimization is essentially a chance of efficiency rates more conversion more dollars per transaction, but it is not more people, it's not or anything it's just better.

Better technology more use of machine learning et cetera. So there's there's a bunch of big buckets, there's no like Oh by the way there as I.

I can tell you where $1 billion is hurting, but we spend a ton of money on cloud we'd spend a ton of money.

On adding capabilities and over time as you do it on one platform. It all becomes more efficient so I think.

It's a lot of little things, but it adds up with our base of of people and fixed caused it adds up.

Significantly over time, and we've been able to maintain our head count at a level, we feel good about and we think we can grow massively on top of that without having to add lots of bodies.

Will do it.

Thanks, I appreciate the details.

Thank you and the final question does he get plenty of that.

Please go ahead your line is open.

Hey, great. Thanks, Thanks for sneaking in just two if I may Peter. Thank you mentioned earlier. This year, you would pull back marketing and some of the European countries, because you weren't happy with the wrong can.

Can you talk about where the product is for you to lean back into those countries and then just unbearable just on the supply can you talk about any benefit you're seeing from higher interest rates.

Getting a potentially getting more global supply. Thanks.

Yeah.

I wish we had a quick of Twitch muscle to tell you that interest rates are driving.

Driving homeowners to us, but I can tell you is robo all through Covid and still produces more per home owner and more for.

Per house than any of our competitors. So I think we are a great place for homeowners, who want to monetize their assets to come.

Assuming it's in places that are interesting to us and where we can drive business. So I think we set up quite nicely. If you believe in that contract that people need to monetize.

Their homes and their assets are second homes et cetera, again, we do where.

Not doing a lot of primary home, where people move out of their house and rented for two days or whatever that's not really our business model, but.

But there is lots of opportunity and and presumably people who may be a little less flush with the cost of capital and may want to monetize that so I think directly it's positive, but it's not that quick Twitch thing that we see a massive uplift just because rates increase.

But we are pushing into it and we expect supplied grow meaningfully next year.

As far as the <unk>.

Marketing question. It goes back really beyond this past year I mean, we we saw a lot of pockets, where we were over invested weren't getting the return weren't getting the long term return that even made sense of what we're investing to buy traffic and some parts of Europe and other places and we ratcheted that.

Back we've found this as I mentioned as we as we keep rebalancing, sometimes we're finding opportunity to push back in and some of those places. So it's not it's not like there's a line in the sand and we got to it and we're staying there like we pulled back and then we saw opportunity in some cases, we pushed in a little bit more but I think broadly at the.

Art of your question, which is right we want to be wind up with all the right product capabilities to go after a market fully and right now we're sort of perfecting our products in North America in terms of.

How everything works out of loyalty rolls out how people get signed up how we engage them with CRM everything and that's a model. We then want to repeat now many big markets across the globe. We have many of those things, but we have a very focused idea we're going to get the product setup and then we're going to go hard after markets and then.

We believe we can win with this strategy that we that.

We think is winning right now here so.

So we'll keep pushing on it and.

And.

We're not there yet, but I think as we get into next year, we will have a much clearer idea of where you'll see us take some more aggressive action in certain markets, where they think there's opportunity of course, there's some macroeconomic noise to watch out for their cause that may be markets, we want to get aggressive and.

May have economic Jones is so similar to balance all those things, but that is our approach to it we want the end to end product would be great. We want the loyalty and all the pieces to be there and why do we have like our full suite of of weapons. We're gonna go go with these markets.

One by one.

Try to women.

Thank you.

Yep.

Thank you. Thank you everybody I think that that's.

Go ahead, operator, sorry.

That contained today's count you may now disconnect your lines and have a nice day.

Thank you everyone take care.