Q4 2022 Expedia Group Inc Earnings Call

Speaker 1: Good day everyone and welcome to the Expedia Group Q4 2022 Financial Results Telecom Conference.

Speaker 2: My name is Emily and I'll be the operator for today's call. If you wish to ask a question at the end of the presentation, please press Start for a By 1 on your telephone keypad. If you change your mind, please press Start for a By 2 to cancel your request. For opening remarks, I will turn the call over to Senior Vice President, Corporate Development, Strategy and Investor Relations, Harship Farsh. Please go ahead. Good afternoon and welcome to Expedia Group's earnings call for the fourth quarter of 2022 that ended December 31.

Speaker 3: I am pleased to be joined on the call today by our CEO Peter Kern and our CFO Julie Vellin. The following discussion including responses to your questions reflects management's view as of today, February 9, 2023 only. We do not undertake any obligation to update or revise this information.

Speaker 4: 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 in that or similar statements. Please refer to the trade 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 powers.

Speaker 5: site for other important information unless otherwise stated any reference to expenses excludes stock based compensation and with that let me turn the call over to Peter.

Speaker 6: Thank you, Arsett, and good afternoon, and thank you all for joining us today. This past year was an important one in our company's journey. We did a ton of work and made great progress on many transformational initiatives, all while delivering record EBITDA.

Speaker 7: Q4 was yet another step in that journey, despite the impact to RP&L from the severe weather. Hurricane E in an early October and the winter storms in late December drove up cancellations, causing bookings and revenue for the quarter to come in behind our expectations, despite demand otherwise accelerating through the quarter.

Speaker 8: The good news is that we have seen those bokeh trends come back much stronger in January post-the disruptions, so 23 is off to a great start.

Speaker 9: And we were really pleased that our investment over the last several years in service technology and capabilities allowed us to deliver best-in-class service through these difficult travel circumstances.

Speaker 10: I've said many times before when your strategy is centered around a long-term retention of valuable customers, every element of the work must deliver for the traveler. So a big thanks to our service team for all their hard work, especially over the holidays.

Speaker 11: Now as we launch into 23, I'm particularly pleased with our strategy of investing in and retaining high lifetime value members is showing accelerating improvement across our business.

Speaker 12: For the fourth quarter of 22 versus 19, our new customers that became loyalty members grew over 60 percent, and we enter 23, 3 with a record number of active loyalty members, which is 10 percent higher than any prior year. And just as importantly, our quarterly active app users increased by approximately 40 percent.

Speaker 13: For us, these are the most important metrics to gauge the progress of our strategy. Just remind you our loyalty members each drive two times the gross profit and repeat business over an 18-month period as compared to non-members. And our app users each drive two and a half times the gross profit and repeat business over the same period.

Speaker 14: When you combine these two and have a loyalty member who also uses the app, distrides the highest production of all, and that group represented the fastest growing customer cohort for us in 2022.

Speaker 15: But as strong as those numbers are for our overall business, they're even better in our expedient brand in the US.

Speaker 16: This is extremely important because Expedia U.S. is the business where we've been able to make our fastest product and marketing improvements and where we have the most complete set of capabilities to support our strategy.

Speaker 17: And the evidence is clear. In the fourth quarter of 22 versus 19, Speedy and U.S. grew new customers that became loyalty members by over 300%. And enters 23 with nearly 70% more active loyalty members than any prior year, and almost 60% more active app users.

Speaker 18: Expedia U.S. was able to deliver almost 20% revenue growth in 22 as compared to 19 and there's still plenty of improvements yet to come.

Speaker 19: Of course, when you look at our all-up B2C numbers, the accelerating performance of XPDA US has been largely offset by our intentional de-emphasis of some smaller non-core brands, our pullback in certain geographies where we did not have the right model. And of course,

Speaker 20: are much discussed technical migration, which requires significant work and like all migrations resulted in some short-term friction.

Speaker 21: But what I'm really excited about is that with the proofs now very clear that our strategy is working, we will begin more aggressively rolling it out to our other brands and our non-US markets.

Speaker 22: After years of democratizing travel, we are now taking a leap forward to use cutting-edge technology, a better marketplace, a broader rewards program, and best-in-class service to drive true customer benefit and loyalty. Because when you take care of customers and give them great experiences, they keep coming back, and that's how you win. And...

Speaker 23: In support of this long-term strategy, you will see us maintain a higher mix of marketing spend to channels that attract desirable long-term customers rather than just chasing short-term transactions.

Speaker 24: Therefore, the parameters of when and who is worth marketing to and winning as a customer will be different.

Speaker 25: We have clearly proven the value of attracting and retaining the right customers and increasingly our P&L will reflect that.

Speaker 26: We're starting 23 with the highest number of active oil team members and app users for any year. And we will see further momentum in the business this year thanks to a much larger base of oil customers.

Speaker 27: Of course, our confidence in our strategy is ultimately only possible because of the underlying technology that we have invested so much in over the last several years.

Speaker 28: This is what is enabled to expedite the U.S. to go faster and all of our brands and geographies.

Speaker 29: Begin to ride on that same text act, we will expand our ability to compete and win in more places.

Speaker 30: Work that created a drag on our business in 22, like the migration of hotel.com to our core platform, will come big on locks for us in 23.

Speaker 31: As one example of this, we expect our test velocity around optimizing our site to grow roughly fourfold with the same resources this year. As more engineers and product team members are freed up post-migration, and our tests can be run across our entire base of core OTA traffic.

Speaker 32: In other words, we will have many more tests where the winners get deployed across a much larger base.

And as we continue to invest further in product and technology and new features and capabilities to take online travel to the next level, these improvements increasingly impact more and more of our customers, more rapidly worldwide.

No travel player in the world has done more over the last few years to innovate around the shopping and service experience to improve the travel journey for the consumer.

And just to emphasize the point, all of our advances in technology and product and in customer service not only benefit our direct customers, but continue to benefit our expanding base of B2B partners as well. Our B2B business is one of the largest in the world and continues to grow rapidly. The breadth and depth of our products are expanding.

as is our partner base. Reinforcing the importance of our supply and our technology as the core operating system of the travel market.

To that end, we added many new partners and groups significantly in 22 despite Asia still being greatly constrained.

With the return of travel into and out of China in 23 and a robust pipeline of new partners around the world We anticipate significant growth and a great year for our B2B business

So, as we wrap up what was the most profitable year in our history, we begin what will be another exciting year of growth and the last in our major technical overall. This coming year we will finish moving all of our brands onto one front end stack. Verbo, the last major brand to come across, has already been testing traffic on the new front end.

and we'll make the final migration in the coming months.

This last step will then allow us to launch our new one key royalty program, which will spend all of our main brands.

It will be the broadest, most flexible loyalty program in the world.

And for the first time, give vacation home renters the benefits of the loyalty program. And importantly, it will complement our many partners loyalty programs as well.

So overall, I'm confident that with more technical tailwinds than headwinds this year and with a proven strategy that we will be expanding on, we will once again drive strong financial growth while completing the last of our major changes. It has taken several years and a lot of hard work, investment and patience.

But we are extremely gratified about where we are and what we know we can deliver going forward. And I'm even more excited about moving the last big boulders of our plan across the line and driving greater acceleration in the future.

And with that, let me hand it over to Julie.

Thanks Peter and hello everyone. 2022 was a year significant progress on our strategic growth initiatives and our financial results are evidence that we are on the right path to deliver long-term profitable growth.

The accelerating success of our lodging business, particularly in our brand Expedia Business in the US, which is the first of our brands to benefit from our transformative tech and marketing initiatives, enabled us to deliver total company record lodging bookings and revenue.

And we did this while at the same time driving significant profitability with record EBITDA levels at over 2.3 billion and an EBITDA margin of over 20%.

Our fourth quarter also benefited from continued strong lodging demand, but unfortunately was heavily impacted by Hurricane Ian and October and the storms in the U.S. during December .

Absolutely, these weather-related events, as well as FX headwinds, are results on both the top and bottom line would have been at record-fourth quarter levels.

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

The likes of like growth rates excludes the contribution from agencia, amic, GBT, and the non-logging elements of our Chase relationship.

As a reminder, on November 1, 2021, we completed the sale of agencia, and our EPS business entered into a 10-year lodging supply agreement with MXGBT.

It is also important to note that our fourth quarter, 2022 growth rates as compared to 2019 were negatively impacted by FX headwinds of approximately 250 basis points to growth bookings, 400 basis points to revenue, and 800 basis points to adjusted EVA DAF or 70 to our adjusted EVA DAF margin.

We believe these likes for like numbers and the disclosure of the negative impact from FX headwinds are helpful in assessing the operational performance of our business.

Please note that we will discontinue disclosing these likes for like numbers next quarter, the first quarter of 23, as we move away from comparing our financial performance to 2019 levels and move towards standard year-over-year comparisons.

Now let's move back to our performance this quarter, starting with our gross booking trends.

Total gross bookings were down 12% on a recorded basis and down 2% on a like for like basis versus the fourth quarter 2019.

Total gross bookings were impacted by a spiking cancellations and loss transactions related to the hurricane and the winter storms in the US as previously mentioned.

If we further adjust for the approximately 250 basis points negative impact from FX during the quarter, our gross bookings would have been above 2019 levels.

Growth was driven by total lodging growth booking, which were the highest Q4 on record at plus 4% on a reported basis, and plus 6% on a like to like basis, versus Q4 2019.

By month, lodging gross bookings on a reported basis were up 3% in October , which was impacted by the hurricane, up 7% in November , and up 2% in December , which was impacted by the winter storms in the US.

Excluding the weather-related events, growth versus 2019 for each month in Q4 reached high single digits that accelerated to the quarter.

And in January , we saw a step change where our lodging gross bookings accelerated even further growing over 20% versus 2019.

While it is still early in the quarter and 2023, we are pleased to see strong lodging demand continue, including total lodging bookings for stays expected to occur in the first half of 2023, continuing to meaningfully outpace 2019 and 2022 levels.

Moving to the key financial metrics in the P&L, starting with total revenue. Revenue of 2.6 billion was down 5% on a reported basis and down 1% on a like for like basis versus Q4 2019 and includes the 400 basis point negative impact from PFX.

as well as the financial impact in the weather-related events. Excluding these factors, our reported revenue would have been above 2019 levels.

Total revenue margin also improved to 13% for the quarter, or up approximately 90 basis points versus Q4 2019, as we continue to benefit from a mix shift towards our higher margin lodging business, which as a percentage of the total has grown approximately a thousand basis points over the same period.

Cost of sales was $408 million for the quarter, which is a cost reduction of $125 million, or 24% and 380 basis points of leverage as a percentage of revenue versus 2019.

Driven by our divestures and ongoing efficiencies primarily across our customer support operations.

Our customer support operations continue to benefit from the various automation initiatives we have implemented over the past couple of years. And we expect that going forward with a further consolidation of our tech stack onto a single platform, we should be able to continue to drive efficiencies across our cloud and licensing and maintenance costs.

as we eliminate systems that are no longer necessary to support. Direct sales and marketing expense in the fourth quarter was 1.2 billion, which was up 20% versus 2019.

The primary drivers of this increase over 2019 were associated with both our B2B and B2C businesses.

Our accelerating growth in our B2B business is driving an increase in commissions paid to our partners.

and these commissions fall into our direct sales and marketing line.

In our B2C business, we had increased marketing spend to support our accelerating growth during the quarter. Unfortunately, given the storm-related cancellations and lost transactions and their impact to the top line at the end of the quarter, we did not fully realize the anticipated return of our marketing spend.

In addition, we also have been strategically mixing towards longer-term investments in our marketing spend, which, given the longer-term return profile of the spend, is less closely correlated to demand within any given quarter. As a result of these two factors, we saw this marketing spend de-leveraged versus Q4 2019.

However, on the full year, we saw leverage in our total B-dC spend versus 2019, inclusive of loyalty and discounting that are contra revenue.

and we expect to maintain this leverage for improvement going forward.

Overhead expenses were 590 million, a cost reduction of 157 million on the fourth quarter of 2022, or 21% and 470 basis points of leverage as a percentage of revenue versus 2019.

We continue to remain disciplined on our cost structure, and with the expected improvement from the consolidation of our tech stack and general growth initiatives, we believe we can continue to maintain this lower cost structure and drive long-term leverage as we deliver accelerating top-line growth.

Overhead expenses slightly increased from the third quarter, approximately 23 million, as we continue to invest in top talent across our products and technology teams to help accelerate our various platform initiatives in support of our growth strategies that would drive long-term financial returns.

Adjusted EBITDA with $449 million are down 6% versus 4th quarter 2019 and was down 2% on a like for like basis, which includes the negative impact from the weather related events and effects headwinds.

On a margin basis, we are relatively in line with 2019, despite absorbing these negative impacts. And absentees factors, our fourth quarter adjusted EBITDA grew in the mid-teens as compared to 2019.

Free cash flow for the full year was strong, a positive 2.8 billion, up approximately 1.2 billion, and over 70% versus 2019.

This strength was driven by our record EBITDA levels on the year and an improved benefit from working capital, as well as lower overall capital expenditures, as our spend is now primarily focused on our technology and product transformation.

On the balance sheet, we ended the quarter with strong liquidity of 6.6 billion driven by our unrestricted cash balance of 4.1 billion and our undrawn revolving line of credit of 2.5 billion, which provides us with ample access to cash to operate the business.

This liquidity combined with our strong free cash flow level is enabled us to maximize our return of capital to shareholders during the quarter by further accelerating our share buybacks to approximately 350 million or 3.7 million shares in the fourth quarter.

This resulted in approximately 500 million and 5.2 million shares being repurchased since the end of September 2022.

Even after these buybacks, we enter 2023 with ample levels of shares remaining under existing authorization for future repurchases at approximately 18 million shares.

And giving our ongoing strong liquidity, our confidence in the business, and the fact that our stock remains undervalued and does not reflect our accelerating business performance, we plan to continue to buy back our stock opportunistically in 2023.

In closing, I couldn't be more excited about what lies ahead in 2023 and beyond.

With accelerating demand trends and the proof points that our growth initiatives are working, combined with our strong financial position as we entered 2023 with ample liquidity and a higher margin profile business.

All of this gives us the confidence and our ability to deliver double-digit growth and expanding margins as well as long-term shareholder returns.

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, please press start, followed by one on your telephone keypad.

If you would like to retract your question, please press start for a by 2.

Our first question today comes from Eric Sheridan with Goldman Sachs. Eric, please go ahead.

Thanks so much for taking the questions. Maybe two if I could. In terms of thinking about moving all of your brands and all of your geographies on the technology stack as we go through 2023, there are some elements of either costs that still have to be absorbed by the business model that we should be keeping in mind in 2023. And once that transition is over, how should we be thinking about possible?

front of mind as we think about what growth and volume I build in the B2B business through 2023.

Thanks Eric, that's a lot to cover so I'll start at the top.

In terms of moving the businesses onto a single technology stack and front end stack, I think hotel.com is an extractive example. In the sense that last year we talked about this a few times as we were moving HCOM across, we obviously did less to improve HCOM as a standalone entity.

So there is typically, if you will, a law that takes place as you move things and some friction that you have to absorb in the numbers. So we did that with HCOM as I mentioned. We're now getting the benefit of much faster testing between all the OTA brands. We're both the next one to move.

It will suffer a little bit of the same things, but we think we can absorb that as Julie said and still show the growth. We are planning for this year and that unlocks then of course being able to do one key and other things. So there's a lot of unlocks on the other side, but you do have to sort of weather a little friction to get across and we've weathered it in last years numbers.

We have a little left to whether this year, again we think will drive very good growth despite that and of course when it's behind us grow even faster. So that's what we're really looking at. On the other side of it, you get the benefit of testing faster, improving the products faster across everybody, you get the benefit of one key.

And you also get the benefit of being able to then deprecate older stacks that have costs associated with them, engineers associated with them, etc. So you can put all your resources on the most valuable things. So that's the big thing we've got to have to do. You know, those are the two big hitters we're launching this here, but there's lots of other work.

going on under the covers constantly, both in optimization and in cleaning up and consolidating other backend things in the stack. And then on the B2B front, there's a lot that's gone into what's growing. As I mentioned, we think Asia opening up will be good for us. We've had some big relationships there.

including China where we haven't gotten much output during COVID, that will help. But really, we've been growing across many factors we've talked in the past about our optimized distribution product that we use to help hoteliers with.

Their wholesale businesses, that's been growing very well. We've invested in our travel agent product, which has driven a lot of growth. And we've expanded, as I said, the breadth of our partnerships, the number of our partnerships. We continue to power a lot of the biggest.

supply partners like airlines and others. So we continue to grow kind of in every dimension, sort of more partners, more depth with each partner, and new products coming all the time, so that continues to be an exciting area for us. And as we innovate faster with technology, with AI and other capabilities,

Those underlying capabilities become more and more valuable to our partners.

Wow. I hope we that answered your question.

Hopefully that answer to quest.

Our next question comes from Lee Horowitz with Deutsche Bank. Please go ahead, your line is open.

Great, so just thinking about the investment plans for 2023 and how that impacts margins. So on the one hand you obviously have investments in one key, you know, driving some incremental marketing investments. What are the areas that you see potentially offset some of those incremental investments from perhaps fixed cost growth?

Maybe underlying marketing efficiency, be it bringing in that function under unified stack, or perhaps other areas of cost efficiency that you see across the P&L.

Yeah, thank you.

We will be investing somewhat more in the loyalty program, but we expect, you know, as we've talked about many times, we think about our investment in acquiring and retaining customers as everything from loyalty to discounting to direct marketing spend, you know, in performance brand, et cetera.

And we expect to balance those things. So we don't expect the all up cost of that, if you will, to be expanding over the course of the year. It might shift between buckets. And we believe we can underwrite that with the total spend we already have. So there may be some noise. And when we get there, we'll explain it to you in terms of how to log up.

with growth into January and that looks really healthy. Obviously there's maybe some counter-intuitive given the state of the consumer, savings rates and inflation. What do you owe sort of this?

strong underlying demand for the overall travel industry given the macro

Yeah, I mean, I think you've heard travel CEO talking about it for a while and maybe it was hopeful. But we continue to see that people are prioritizing travel over just about everything. If any of you have been traveling, I'm sure you've seen it. You know, rates are still very high.

demand is high, planes are full. So I think maybe it's still the effect of COVID and people realizing there's more valuable things to do with their lives. And it's not just their revenge travel, but it's beyond that. Like I want to keep traveling. I want to keep enriching my life. But

But I think we're just, you know, we're seeing high demand. We obviously think we're doing a good job of capturing that demand relatively speaking. But the markets are strong. We still haven't seen really Asia come back fully. You know, I'm sure we'll see pockets. I mean, we've all worried about it. But so far, you know, the man continues to be quite robust. And, you know, we're...

Next question comes from Kevin Copeland with Cohen. Please go ahead, your line is open.

Thanks a lot. I had a follow-up on that. Could you help us think about or help us better understand the growth that you're seeing?

year to date. Should we think of that as kind of getting back to that high single digit number or have you been able to surpass that?

Yeah, I think as Julie pointed out, January was north of 20% up and lodging GBV gross bookings. So, we're definitely running ahead of high single digits so far.

We'll have to see how the rest of the year plays out, the quarter rest of the year plays out. But it's really been driven by pretty much all quadrants. It's our brands, it's our B2B business. It's geographically dispersed. Apex coming back a little stronger, but that's a relatively small base for us. So...

You know, it's been pretty broad and right now it's definitely running well ahead of where we were in the fourth quarter. Yeah, and I think just to remember, I even eco back to third quarter, I mean, we also had high single digits. So really the fact that we're holding that X all the storms and the noise that we've been talking to you guys about.

and it's been accelerated in the fourth quarter and we're seeing a step change as we enter into 2023 as well as with our BXUF business. We think that's a really good sign that we've got some strength ahead for this year. Yeah, and I'd add Kevin.

I talked a little bit on the first question about friction. We spent a lot of last year doing some heavy lifting on things like hotel.com, having reduced testing, etc. We really spooled that up in the fourth quarter and it's accelerating further now. So just the ability to be back and really innovating in the product and the day-to-day in the product is really valuable. Both on it.

It's increment by increment. It's small pieces, but when you add them up, it really can drive a lot. So conversions improving, lots of things are improving. So I think we're just starting to multiply those effects of all the work we've done along with the marketing and everything else.

hopefully also we're working in a good demand environment which helps but you know I think those things are just more

More tailwinds than headwinds again and that's just helping to drive us a little faster.

Great, and just one quick follow up on that. You touch on ADR trends. It was the kind of slower number and Q4, was that just related to the weather incident?

Yeah, that was a logic called out in our remarks, but that was pretty much so we do to the weather related incidents. ADR has been holding pretty strong and still elevated. I don't think we've heard anyone outspeak to any issues with ADR. We've seen a little bit of movement in Verbo, but again, it's coming off of really high levels, and it's not that significant slight movement.

Two if I can, first just on the marketing, all in the marketing side, loyalty, discounting, and marketing, and the plan for that to kind of be balanced through the year. Is there a point where you get to the other side of some of this longer dated spend and feel like you're going to see?

leverage as this bears fruit. And then sort of related to that, it sounds like the stats around loyalty and app users are showing compelling uplift. How convinced are you guys, is it that those foods are incremental and kind of causal rather than just coincident?

We are leveraging and we expect to hold that if not prove it next year. We are just wanting to make sure we make the point that on any particular quarter you can see movements. Because we are shifting our spend and have started to do that now for a couple of quarters where we are putting more of our spend into long term.

investments. And so you could make that investment today and get the benefit two or three quarters out. And so it's not about any one particular 90 days that we should be judging per se, the total bucket of our spend. So we're really focused on leveraging it in total on the year across the entire spend profile. So I think that's how you should think about it. I think it's great that we've...

at a pretty exciting time to see this all come to fruition. Yeah, and I would just add on your question of causal or not. What we've seen Lloyd is that we've been able to greatly expand the numbers at a pretty rapid pace and bring more and more people into the loyalty plans and into Appusage and our historical.

You know, those trends I gave about 2X and 2.5X and even higher multiple for app loyalty members. Excuse me. Those have held.

even as we've expanded the pool. So it's not just the devotee who's becoming a loyalty member. It's really everybody.

Excuse me, nursing a cold.

Everybody that we can get into loyalty, that we can get into abuse, it starts to see all the member benefits, starts to get the pricing benefits and the points and other things.

And that's...

consistently sticky and bringing them back and as Julie says over time We'll create more leverage in the model because once we have this bigger and bigger base of oil customers Then you know the marketing beyond that beyond loyalty etc. It becomes

again trying to buy the right customers in given places and add them to the pool. And that we think we can do more effectively once we have a bigger base.

And more efficiently. Excuse my cough. Okay.

The next question comes from Anthony Post with Bank of America Merrill Lynch. Please go ahead, your line is open.

Great, thanks. Maybe one big picture and a quick picture, a question about the shape of the air. Your marketing spend is over 50% of revenues. I know you're working on a lot of projects to build a better customer base. Can you help us think about how do you think about that long term?

And when you said leverage this year, is that mean on that line or you think about as a percentage of bookings for 23? And then secondly, just a comp question. I know some tough virus comps, right? EG virus comps right now. Kind of bookings flowed in kind of in the spring. How are you thinking about the shape of the year

for our models. Thanks. I'll let Julie deal with the second one, but...

So your first one, I think the way to think about it, you got to break it up a little bit. But first of all, we've got expanding B2B business, which where...

you got to break it up a little. But first of all, we've got the expanding B2B business, which were commissions.

are part of our marketing spend. So as that business grows and has been growing currently faster than our B to C business, you've got some movement into that mix where the commissions are higher than this 50% level. So it's pulling.

the number higher. At the same time, we're trying to use marketing to build this basic customers, leverage the model and as the base of direct gets bigger.

You're driving more business from direct and you start to get leverage in what you're spending to add new people to the fall Because the new people become you know a somewhat smaller piece of the overall pie of business And so that is where I think you will start to see us gain leverages at the big base of loyalty and app members grows and grows and grows And we're very focused on retaining them

lowering churn, you know, all the pieces that go into that.

That is how we get a bigger direct business that we're driving on top of you know adding new people to the funnel But that spend is now on top of just a bigger and bigger base of customers to keep coming back So that's where we believe long-term we get that leverage from And you know the better we get at it, you know who knows how we will balance growth and profitability but

you know, that is the base on which we built. And then, let Julie answers. Second question was, can you repeat the second question? I'm sorry Anthony.

Sure. We have easy comps now with virus for a couple of months and then you saw a big flood of bookings into the industry in April and May. Just want to make sure people are thinking about the models right and how you think about that.

We have easy comps now with virus for a couple of months and then you saw a big flood of bookings into the industry in April and May. Just want to make sure people are thinking about the models right and how you think about that.

So just don't go out there. Yeah, I'm looking. Obviously, we have to say that we believe on the year that we can drive double digit costs here every year, where obviously not speaking out plays out by quarter. But I think what's super exciting is how we started 2023 at these levels was greater than 20.

on our last day at Rose Bookie, and really coming out of the year shun, that gives us a lot of confidence, that's a lot of success, the US, and how it's performing under the covers, gives us a lot of confidence for the momentum as we move throughout the year. But I wouldn't get ahead of us right now, so early in the year, early in the quarter, but we are committing to the double-digit growth on the year.

Thank you. The next question comes from Brian Fitzgerald with Wells Fargo. Brian , please go ahead.

Thanks a couple questions guys. Could you give us an update on China Outbound, your partnerships there, and now those work and relation other players in the market and any early thoughts on how you would pursue that opportunity as they reopen. And then the second one was just really quickly on the test velocities that it can grow 4X.

Burbo cuts over in the first half of the year, first couple quarters if I got that right. If you had to put a bow around.

You know the amount of testing across all your properties. Are we in the ninth inning in terms of, or eighth inning in terms of, hey, verbose is the last thing we had to cover and then we're, we're humming on that 4X test velocity.

No, so thank you for that. I'll take a shot at both of those. So China first, our biggest relationship there is outbound with trip.com in China. And then we had some smaller relationships and some offline travel relationships. It's early days. There's tons of interest.

I'm sure you'll hear this from other players, but there's a lot of shopping going on, but it's still fairly challenging. Four outbound travel between the political issues, between airlift, which is challenging, and there's still a lot of unique rules now getting in and out of China that the airlines are dealing with, making hard to fly direct and so forth.

And then of course you've got the issues of Russian air space which create issues with European air left in China. So it's going to take a little while to work itself out, but interest is very high. We expect certainly we are seeing uplift, but we expect a big uplift to be still a little without.

But it's very exciting, obviously, and hopefully some of the things that are going on will quiet down and will continue to see a more robust cooperation between various governments to make it more possible. Certainly, the U.S. travel industry is doing a lot to lobby to get rid of various restrictions.

And then the second piece, we are already planned at 4x velocity. So that has a lot to do with bringing sort of the core classic OTA brands together. So it tells Expedia and then some of the smaller brands that ride the same rails already. Verbo is the next thing to come across and it will benefit from a lot of similar testing.

But it will also be a somewhat unique product in its own right. So the 4X has nothing to do with verbo coming across or not. It's really around core OTA. And verbo comes across, it will get the knock-on effect of some of these winners and some of these benefits that can go across everything, whether it's in checkout or payments or other things.

But on the front end, the Burbo front end will still be a little different and it will get some of those benefits, but the 4X is already baked going to happen. And I think in terms of what we're capable of as a company, I would say that's less than halfway home because as we get more and more of the whole back end of the stack.

aligned as we get, you know, our test environment all aligned. We have lots of opportunity to go faster. And a lot of our tests are now really more than what used to be a single test because they're AI driven with multivariables. And so one test might be the equivalent of 10 tests. So it's really starting to amp up considerably.

And there's a lot of opportunity that we haven't gotten through during all our big transitions because we were just so focused on shifting things and moving them into one platform. And we're finally getting back to the bread and butter of doing that. And there's a lot of upside there.

all. Thanks, Pierp.

You better.

The next question comes from John to Lentony with Jeffries. John , please go ahead.

Hey, things are taking my questions. One of the start with the comment you made about the Expedia brand performing well and that some of your smaller brands and geographies have been sort of dragging down the overall business because of sort of intentional decisions to deemphasize them. So I'm just curious if...

There's an inflection, if there's going to be an inflection point when those smaller brands and geographies become less material so that the overall growth improves as it starts to mirror the Expedia and Verbo brands. And then the second question is...

There's been a big upticking in conversations about AI, and I'm curious if you could unpack where you see the biggest opportunities to leverage AI capabilities across the business and how that could alter your trajectory in the travel ecosystem. I'm customer service.

Obviously, one that immediately comes to mind, but curious to get your perspective on that as well. Thanks. I think we probably talked about your second question for a couple hours, but I'll take your first one first, which is yes. We precisely believe that. With Brand Expedia, again, we talked about Expedia in the US.

Speedy is obviously in a lot of countries. And the issue has been not everything we developed was immediately available in all languages and all geographies. Likewise, not on all brands. So as we start to be able now with hotels.com on the same stack with each benefit from the same goodness that comes from tests and other things.

We're going to be able to roll out that playbook to more and more places. Now there's still some work to do. HCOM's loyalty program is still different than Expedia. Once we have one key, that will simplify that whole ecosystem as well. But we believe that those big brands inclusive of...

Spedia hotel.com now on the same stack and Verbo, you know, and our B2B businesses, they will, you know, they will inflect past the slower growth of some of the smaller things. But we, to be clear, we want to move back into geographies. We want to play this playbook out in more places. This is not about like keeping the good and flowing down the bad.

and there's no bad, but slowing down the slower growing. This is about keeping the focus on the winning strategy and deploying it in as many places in as rigorous and controlled away as we can, and you're winning in more places and driving the business that way. So it's a bit of, you're right, the big good stuff overtaking the slower growth stuff.

It's also about deploying the strategy to some of the slower growth items where we think we can still draw, you know, whether it's a geography or a certain brand in a certain market where we believe we can play this playbook out and have the same success. So it's a combination of those things.

As far as AI goes, the big conversation, we already use a fair amount of AI and machine learning in all kinds of products as opportunities for sure. Some of the newer things we're all talking about.

like voice, and etc. in customer service, we're already experimenting with that there, in creating content, in answering queries for customers. But we're using machine learning across the board in terms of personalization, in terms of

how we sort for you, what we serve up to you, we'll use it in direct consumer communications over time, et cetera. So we're using that, and as I mentioned, we're using it in testing as well as we develop more sophisticated algorithms to test multi-variable tests. You do multi-variable tests that expedites all our testing. So.

We're using it, I'd say it's probably as big as high as value is ultimately in personalization. But you can think about that really broadly in terms of how you get service taken care of, how you search even for properties, natural voice search, which we already have a voice search capability, but that will get better with the benefit of...

the new AI capability. So all of those things become big opportunities. To invest it in we, I think we are by far at the forefront in our category in terms of how to use it and how we can use it to best improve the customer experience.

So all of those things become big opportunities to invest it. And I think we are by far at the forefront in our category in terms of how to use it and how we can use it to best improve the customer experience. Thanks for tuning in.

Thanks. The next question comes from Tom Champeon with Pytus Handler. Please go ahead, Tom. Your line is open.

Hi, good afternoon. Maybe two quick ones for Julie. Julie, could you just quickly restate and clarify the guidance and expectations for the year? I think it was double digit growth. Is that in bookings? Is that versus 2019 or year over year? Can you just...

I was also curious if your comments around Headcount seems like a little bit of a different comment than we've been hearing this earnings season. How are you thinking about Headcount through the year? Thank you. Yeah, so from a guy in...

perspective, we said, you know, double digit growth that's on both sides of bottom line and it's relevant to a year over year. So as I mentioned at the beginning that, you know, we're going to be switching next year to no longer be per se, attracting against a four-year-old metric. We're going to move to...

year over year and so that guidance is relevant to that. Regarding headcounts, yes, that is different, probably what you've heard at other places. I think what's important to remember is that the team here did an incredible job taking out a billion dollars worth of cost.

over the last couple of years. And so we're coming, you know, access from a different spot than many other, you know, check companies and so forth. And so we've taken out a lot of that cost already and heads. I think, you know, we're down at some point, down 30% or so. And so, again, coming from a different spot, we're really being thoughtful about what we invest back in.

for obvious reasons. We're watching the economy just like everybody else. I think we're seeing incredibly strong business, but we're being thoughtful about who we invest back into. And really our investments are primarily in product and tech to support our growth initiatives and to get us over this line.

the feeders been talking about getting this text back completed. And so, we build, like we're in a great spot, we'll do that with, you know, limited levels of headcount growth and maintaining our strong financial discipline, keeping our construction below our sales growth.

Thank you.

The next question comes from Doug and with JP Morgan Chase. Doug please go ahead.

Hello, this is David Young, product and for taking the questions I have to. So, for this, I'm just a man comment. Is there something that you're seeing across GEOs and the combination question or are there any particular GEOs or any property types that might be? Yes.

driving some of that stress that you're seeing. And then if we would regard to your January comment, let's change from 4Q to January that I see driving this from logic growth in January . And how so stay in what you think those sectors are from 4?

Yeah, so I think to your first question, we're not seeing anything, you know, I'm sure we could dissect every variable and find some difference. But there's not anything when you look at a Broadway that says, you know, what you're doing well, but the bottom's doing poorly or vice versa. You know, we are generally a little more biased towards this.

the middle and upper end of the market. And we are seeing fairly consistent strength. As I mentioned, APAC measured against itself is coming back faster, but it had a longer way to come back. Obviously, the West has been back for a while, but it's also seeing nice growth.

you know, impact rest is not big enough to drive our overall number, so it really is kind of everything. And by and large, it's every class of product and class of, and you know, and every type within of the class of products. So.

There's nothing we've really seen that's striving like, wow, you know, what's Reeves off the board and everything else is making up for other things. So we haven't seen much movement between products or trade downs or any of that. It's been pretty consistent. And then January , as I mentioned, you know, we're...

We believe it's a combination of a lot of work we've put in in terms of improving the product, getting through some of the hardest transitions, getting back to testing, getting our marketing machine refined, and that's constantly improving. And we've been talking for a long time.

We mentioned it that we've been investing for a while in some of these long-term vectors. And as we've all talked about, we gave up some short-term business to focus on app downloads, to focus on getting the right kinds of customers. And we knew it would take some time for this to start to multiply on itself and get the benefit because people don't always.

you know, book travel 20 times a year. So, you know, I think this is the benefit of time, of catching up and stacking up these, you know, the base of members, the base of app users. Improving the product as we've gone, we've launched a bunch of great features around white tracking and comparison shopping and smart shopping and...

collaborative shopping and a bunch of new products, all of which have been very engaging in their own right. We're rolling those out to more places all the time. We just recently rolled out flight tracking to the rest of the world outside the U.S. So we're seeing great benefits in those things and I think they're just starting to stack up now.

There's no magic to January 1, so I can't tell you exactly why January . But post all the disruptions of the storms, we've seen really strong robust demand and rebound. And I think it's the combination of a ton of hard work across our entire come.

Thank you. Our final question today comes from Deepak Mathevanand with Wolf Research. Deepak, please go ahead.

Great, thanks for taking the question. Maybe a couple of ones for Julie. So first, the guidance on margin expansion was helpful, but curious if you can put any more specificity to it. Understand that, obviously, macro creates a lot of uncertainties. But is there a level that we can expect should macro trends kind of remain consistent with?

what you see in January and maybe recovery holds up through the year. And then also another financial question, maybe on buybacks. What is the philosophy in terms of maintaining the velocity of buybacks? It's for you kind of good proxy for us to think about. Given the business is very cash flow generative and you have plenty of good.

proud of where our margins are, certainly.

We would love to give a target, but I think at that point, I think I can spend the last time that when you give a target, then they want the higher target. So we're really pushing towards driving efficient growth and driving profitable growth. And we think as we're starting to demonstrate, when we're getting these lifetime value customers, and we can get more efficient as we have started to do on the year with our marketing.

is margin expansion, but over time we can update you on energy move through. From us, buyback perspective. As I said earlier, we're really committed to buying back our stock. We believe it's the best use of capital to maximize shareholder returns at this time. Certainly, with that momentum, we're seeing as a business.

Our stock is still undervalued, we believe. And so therefore, we believe buying back our own stock is the best return. So we're going to continue with that. We're going to buy it back opportunistically. Obviously, as you mentioned, and as we said earlier, we did buy it back on an accelerated basis. 330 million approximately in the fourth quarter. And that was on top of another, you know, four over the first quarter. So we're going to, kind of, just self-scared fact we paid back. So V quake. That did

I can see back. I think that was it. So thank you all for joining us. Appreciate your time and look forward to our next update. Take care.

Thank you, Opera. That concludes today's call. You may now disconnect your lines. Have a nice day.