Q1 2023 Expedia Inc Earnings Call
With our active loyalty member base for our core OTA brands grow over 25% year over year and the percentage of gross bookings coming through our app roughly doubled what it was in 2019. This continued.
Growth in our base of valuable customer cohorts, obviously bodes very well for our future.
I've also talked for a number of quarters about our platform journey and in particular about the drag we had last year on our business, resulting from the migration of hotels dot com to the brand Expedia stack them.
I'm pleased to say that with that migration fully behind us hotels Dot com is now back in growth mode. We are already seeing higher conversion increased feature velocity and higher bookings in fact year over year bookings growth for hotels Dot com was nearly 20% in Q1, 'twenty three which is beginning to approach the almost 30% we saw on brand Expedia. This.
Inflection back towards growth was exactly what we had expected and we were pleased to see the pivot come so quickly.
As you May recall, we are following the same migration path with Faribault, which has now started taking some traffic on the expedia stack in our largest markets.
Just as we saw last year with hotels Dot Com. This work has slowed conversion and feature work on or above for the past few quarters and as we cut over we expect some inevitable degradation in conversion due to the switch, but as we get this migration finished in the coming months <unk> will be in prime position to benefit from the Expedia platform and just like hotels Dot com will.
Fit from re accelerating testing conversion and feature improvements.
Our tech journey hasn't been easy, but we had to have conviction to give up some short term gratification to get to the promised land.
With a couple of Big lastly, after finishing this year, we will finally be in position for all of our business to accelerate the velocity of innovation and deploy more traveler features as widely as possible.
In particular I'm excited about the power to deploy AI and machine learning to all corners of our product to enhance the customer experience and move towards our north star of true personalization.
To that end you probably noticed our launch of the Expedia plug in for Chad GPT and the launch of chat GPT in our own Expedia iOS App. This would not have been possible at this speed or with this efficacy in our prior world and it is just a small piece of what the future will hold.
It is yet to be seen how impactful large language models will be in facilitating travel shopping but for US. This is just one step in the journey to bring the best technology to our members and partners.
An accelerated pace.
And to be clear, we have already been at the cutting edge of deploying AI and ml across almost all experiences for our consumers.
When they land on our side, we use AI to customize the sorting and filtering options and the images, we render to make the shopping experience most relevant to them.
It allows us to deliver price predictions and enable comparison shopping so they can put the right product with confidence than.
And then post booking we use AI in our service stack to help consumers self serve their problems and it even helps our customer service agents more quickly address issues.
While we have been using AI and ml for some time to make the experience better for consumers. We will go much further this year to continue to deliver the best technology in online travel.
Another exciting milestone ahead of us as our unified loyalty program <unk>, which will be released in July in the United States. It reflects the culmination of years of work on the technology side to get to a solution that enables earn and burn across multiple products and brands in our portfolio.
We've been busy testing this program in sourcing preferred deals for our members all with great results to date, and we cannot wait to launch it this summer.
I discussed many times, how our broad investment and technology, not only benefits the BDC traveler experience, but how it also enhances our <unk> partner experience. This includes the over $400 million royalty members, we serve through our template partners the more than 35000 offline travel agencies, we power across more than 30 countries.
All the way to our numerous API partners, who take our inventory and certain tech capabilities to build their own experiences.
On the back of this demand in our <unk> business continues to accelerate worldwide, we had yet another quarter of impressive growth with revenue growing approximately 55% year over year.
We continue to sign new business, including Sofia, who has launched our full template product to their customer base and as we look to enhance our partnerships with our biggest suppliers.
We went live with both Hilton and a core who will use our capabilities to sell packages on their sites. These are just a few examples and we have many more wins coming this year.
We continue.
To innovate for our supply partners and equip them with highly differentiated solutions last year, we spoke about our optimized distribution product that gives our lodging partners greater control of their wholesale business.
This product that helps some of the biggest hoteliers in the world and over the past two years, we have tripled the number of participating chains using this capability.
There are significant innovations coming this year to give more control to our partners and our smaller partners to participate in the product.
Particularly proud of this product as it truly represents a winning technology for the entire industry and allows us to provide much more than just the marketplace for our partners.
Finally, there was somewhat more nascent we've talked about our ambitions to externalize our tech in the form of micro services to help any kind of travel company use our tech to enhance their business.
Our first pilot of our fraud capabilities started late last year.
And I'm proud to say, we now have our first paying customer on the service. We also have other products in beta testing with a number of partners, including our best in class service technology, and our revenue management API.
While still early days, we believe that by delivering our technology is micro services. We are greatly expanding the addressable market for our tech and cementing our technology is the core operating system for the travel industry.
Next week, we will host our explore partner event at our Seattle campus, where we are excited to showcase what we have been working on for our partners and how we are helping our partners sell more operate more efficiently and ultimately better serve travelers around the world.
Overall, I'm really pleased with our progress I'm excited that we're in the final innings of our tech transformation and I'm encouraged by the incremental momentum we achieved with every step we have been willing to take some short term lumps in order to get these moves finished but the rewards are now clearly becoming visible in the hotels dot com reacceleration and the sheer velocity of our tech.
Delivery.
And in our <unk> business, where we have not had disruption and have only enriched our offerings. Our growth has been phenomenal no company is doing more to move travel tech forward and make the entire experience better for travelers and ultimately that is how we will win and with that let me hand, it over to Julie.
Thanks, Peter and Hello, everyone I am pleased with our performance in the first quarter with record lodging levels driving gross bookings up 20% year over year revenue up 18% to its highest ever first quarter levels and record free cash flow a robust top line performance reflects the success from our strategic growth initiatives as well as the continued health.
The travel industry and it's the strength in the business that gives us the confidence to continue to buyback our stock and accelerated levels at $600 million one of the largest buybacks we have done here today.
Before I jump into more of the detail I wanted to remind you that effective this quarter and going forward all financial comparisons will be on a year over year basis. As a result, we no longer need to refer to like for like growth rates as the egencia transaction and associated Amex GBT supply agreement closed in 2021.
Additionally to provide more clarity and transparency, we have removed less relevant disclosures and discussions within the press release, while at the same time added new disclosures such as lodging gross bookings of.
Of course, we will continue to evaluate whether any additional disclosures maybe helpful over time, and we'll update you accordingly.
It is also important to note that our first quarter 2023 growth rates as compared to 2022 were negatively impacted by FX headwinds of approximately 200 basis points to gross bookings 300 basis points to revenue and 600 basis points to EBITDA. We also saw an approximately 80 basis point headwind to the EBITDA margin.
Now, let's discuss more of the financial details regarding our performance this quarter, beginning with our gross booking trends.
Total gross bookings of $29 4 billion were up 20% versus the first quarter of 2022 and saw a sequential acceleration in the year over year growth rate from the fourth quarter.
Growth was driven primarily by total lodging gross bookings, which grew 19% versus last year and reached a record quarterly level of $21 1 billion.
In our hotel business, we saw significant growth from our <unk> segment, driven by strong demand in EMEA and APAC and.
In our <unk> business brand Expedia maintained strong growth in our hotels Dot Com brand showed impressive recovery post its migration to the brand Expedia platform.
These results are also aided to some extent by shifting demand patterns for instance, as more and more businesses returned to hybrid work policies. We've seen increased demand in urban markets and a reduction in length of stay.
So while these trends are helping our hotels business at the same trends are also putting some pressure on our variable business yet this pressure with far outweighed by our hotel strength, enabling us to maintain total lodging bookings at record levels.
We also saw strong growth in our air bookings this quarter, especially in international travel, which was more impacted by the <unk> during the first quarter last year.
This error strength with both in the number of tickets sold and an air ticket price increases as demand continues to outstrip capacity.
It is great to see that air continues to gain momentum despite higher prices and international Air has recovered to close to 2019 levels.
Moving to the key financial metrics in the P&L, starting with total revenue revenue was the highest first quarter on record at $2 7 billion up 18% versus the first quarter of 2022.
The revenue margin at nine 1% was down slightly versus last year, driven mostly by the strong recovery in our lower margin air business.
Cost of sales was $411 million for the quarter, which is up about $43 million or 12% with approximately 100 basis points of leverage as a percentage of revenue versus the first quarter of 2022, driven by ongoing efficiencies primarily across our customer support operations.
We benefited from lower customer support call volume as well as the continued efficiency from the various automation initiatives, we have implemented over the past few years.
And we expect to continue to find even more efficiencies as we finish our migration onto one platform in areas, such as cloud and license and maintenance costs as we eliminate redundant systems.
Direct sales and marketing expense in the first quarter was $1 5 billion, which was up $311 million or 26% versus last year. There were two main drivers of the spend increase.
First in our <unk> business, we leaned into marketing to take advantage of a strong demand environment and to accelerate gross bookings growth.
And we also maintained our marketing spend mix towards longer term payback channels to drive loyalty members and App users, which given the longer term return profile of the spend is less closely correlated to demand within any given quarter.
The second reason for the increase in marketing spend as an increase in commissions to support the accelerated growth in our <unk> business, which fall into our direct sales and marketing line.
These commissions are generally paid on a state basis and to a contractually agreed percentage and therefore, the return against marketing spend on more guaranteed and immediate.
Given these factors and the fact that we underinvested last year due to omicron, we did see marketing deleverage.
Overhead expenses were $588 million, an increase of $56 million or 11% versus the first quarter of 2022 growing slower than revenue growth, resulting in leverage of approximately 160 basis points.
While we remain disciplined on our overall cost structure, we continue to invest in talent across our product and technology teams in support of our platform initiatives to drive growth.
EBITDA was $185 million up $12 million or 7% versus the first quarter of 2022, which includes the <unk> hundred basis point negative impact to growth from FX. Excluding this year over year negative FX impact EBITDA grew 23% and ahead of revenue growth, resulting in an EBITDA margin excluding <unk>.
10 basis points above last year.
Free cash flow for the quarter was at record levels at a positive $2 9 billion or up 3% versus 2022, primarily driven by higher working capital from the outperformance in our gross bookings.
On the balance sheet, we ended the quarter with over $5 9 billion in unrestricted cash and our Undrawn revolving line of credit of $2 5 billion, which provides us with ample liquidity of $8 4 billion to operate the business.
From a debt perspective, our debt level remains at approximately $6 3 billion with a leverage ratio of two seven X. However in order to further fortify our investment grade rating, we are targeting a leverage ratio of approximately two times.
And through EBITDA growth and potentially some early retirement of debt, we expect to make progress towards this goal by the end of the year.
The Great News is we have recently received upgraded ratings or outlooks from all three rating agencies demonstrating the actions we have taken to improve the financial strength of the business are being well received.
As far as capital allocation, given our strong free cash flow levels and a stock price that we believe remains undervalued relative to our expected long term performance, we have been opportunistically buying back our stock on an accelerated basis.
Year to date. This is one of our largest levels of buyback of 600 million or nearly 6 million shares post. These buybacks, we have ample levels of shares remaining under our existing authorization for future repurchases at approximately $12 1 million shares.
And considering our ongoing strong liquidity and free cash flow as long as we continue to believe that our stock remains undervalued and does not reflect our confidence in the long term strength of the business. We plan to continue buying back our stock opportunistically throughout 2023.
Looking ahead, given the strength, we continue to see in our business. We are reiterating our full year outlook of double digit topline growth with margin expansion.
As it pertains to the second quarter. It is important to remember that although we continue to see strong travel demand, we expect year over year topline growth to moderate in the short term to mid single digits, primarily driven by a tougher compare given the strength in the business last year from the immediate rebound we saw post omicron as well as some short term disruption to verbal Reis.
<unk> from its migration to the core Expedia staff.
In addition, similar to the first quarter, we expect to lean into marketing in the second quarter as we invest to drive gross bookings and increase the loyalty membership and App usage ahead of the busy summer season, all of which should set us up for a stronger back half.
Overall, we expect to see EBITDA margins in the second quarter to be relatively in line with last year.
In closing 2023 is off to a great start with record revenue and cash flow the travel industry appears to be strong and growing and our growth initiatives are gaining momentum in all of this we believe positions us well to drive long term growth and shareholder returns and with that I would now like to open the call for questions. Thank you.
Okay.
As a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.
You retract your question. Please press star followed by <unk>.
Our first question today comes from Lee Horowitz with Deutsche Bank. Please go ahead.
Yes.
Great. Thanks, so much so you talked about continued improvement in loyalty.
Can you maybe help.
Quantify sort of indirect bookings.
Thanks, Randy Good morning, the way you view advertising leverage.
Hey, Duane in second half of the year and you look at next year.
Okay.
Sure. Thanks, Lee of little hard to hear you, but I think I got it.
So basically the way we think about it as a business we said it last quarter its running at a similar level about two thirds of the business. It comes from direct.
That continues to grow as a nominal number but as a percentages, it's fairly similar to where it was a quarter ago.
And basically yes, we are investing in app and these longer and loyalty in these longer term payback products, but remember we're only taking a portion of our quarterly spend if you will and putting it into these channels. So it's not like we reverse the model and its all onto these long term channels, we're peeling off of <unk>.
One of it fairly modest, but sizable portion and putting it into these longer channels, but it means we give up some short term payback and it means we stack up these customers over time, but given that it's not our full spend it takes a while for this to stack up then you add to that that we are now getting back to the conversion levels, we used to have.
And accelerating through them as we get H come on on the back stack as we get variable on the new stack and we're accelerating.
Ex itself because brand Expedia itself, because we are just upping the velocity of testing massively. So we're getting a lot of improvement a lot of its coming through this year and coming in even as we speak and so the reason we have confidence in the leverage that will come in the back half of this year and the future is where both stacking up the royalty.
And the App usage in all of these more direct channels. That's what we're doing with the money that we can tactically spend differently, but we're also changing and improving the product and the conversion in the product. So that every dollar we will work harder in the future. So all of that is coming and then <unk> launches in July which is yet again another sticky.
<unk> future that will add millions of people from verbal customers from <unk> into the mix.
NOL more of our loyalty members to spend across more products. So all of that is coming in kind of at the same time not that it's going to be a moment in time inflection, but it's building on itself and that's why we've said second half of this year will be stronger and obviously going forward beyond that once we get past.
The one key rollout et cetera would be even stronger. So so that's what gives us confidence in the marketing leverage it's not like one tactical change in spend changes at all it's a combination of building that up over time, plus adding the product benefits and getting all the technical work behind it.
Great. Thanks.
One more.
With travel seemingly shifting back towards areas, where you guys are.
Our incredibly strong urban and international and the like can you give us an update on how you think U S hotels share progressed in the quarter and what your expectations are here for the rest of the year, particularly with <unk> com accelerating at this point.
Yes, I think broadly we feel like from a share perspective in hotels.
Latin America, we essentially held share maybe slightly better.
Not overinvest in the problem again, it's a balance this journey as a balance of how you spend versus how the technology comes online or we could have spent a lot more on hotels dot com last year, but it wouldn't have been as effective as hotel dot com gets better we can spend more so all of these capabilities give us more weapons to fight a better and.
And so we feel like we've held maybe slightly better and we should see acceleration from that and equally importantly, we did pull back as you know.
Last few years from some international spots, where we were not as effective and as efficient, but as we now feel like the products improve we have a marketing model that we believe and we feel like we'll be in a position to start rolling out more aggressively.
Not a north America story it has been for a while but this is really how do we grow beyond that as well.
No we get past these.
Technical hurdles and are in a position to roll more quickly across the world.
Helpful. Thank you.
Yes.
Our next question comes from Kevin Kopelman with Cowen Kevin. Please go ahead. Your line is open.
Hi, This is Jacob seed in for Kevin Global Man, just a question on <unk> launch so with the launch in July how are you thinking about some of the smaller brands that are not going to be included in the launching and how are you thinking about managing that going forward. Thanks.
Yeah, Thanks, Jacob I think.
We've talked about a couple of times before but by and large we have somewhat deemphasize and not invested as strongly in the smaller brands as we continue to put more heft behind the big three brands.
<unk> will envelop the big three.
<unk>.
We certainly arent going to take our brands away from people.
Right away or anything, but we do believe that.
That over time people will migrate to our big three brands were the latest product features are the.
<unk> is et cetera, so essentially the way to think about it and that's why we've.
Talked about how brand Expedia is doing how how hotels dot com is accelerating as we've got a drag on the business, which is sort of our other brands going sideways to slightly down.
As against the businesses that are growing more quickly, where we're investing and where the product is accelerating faster. So it's essentially there. So there's a little bit off the big brands have to be <unk>.
Sideways or slightly.
ROE degradation of the other brands, but that's something we planned for in terms of the guidance. We've given this year and certainly something we planned for a long term.
Great. Thanks, Peter.
Okay.
Okay.
Our next question comes from Anthony <unk> with Bank of America Merrill Lynch. Please go ahead Anthony.
Anthony you might be on Anthony Your line is open.
Our next question. Thank you for taking my question a question.
Okay.
Alright, great. Thank you for taking my question I guess, a couple of things.
I see the BBB growth versus <unk>.
Outpacing the core retail.
How do you think about that business as a margin versus your core business and should we expect to see more and more the retail accelerate as you kind of fix the platforms of Expedia and hotels Dot Com and then secondly, as you think about the.
Overall use of cash anything to stop you from deploying cash flow to buybacks or anything on the debt side, we should be thinking about thank you.
Yeah, I'll take the first part and then leave the capital side the jewelry, but.
So I think the the <unk> business has been growing terrifically as I mentioned in my prepared remarks.
We haven't had to do any big technical migrations in fact, we've added to the capabilities over the last couple of years and we've seen the benefits of that in many of our business lines that.
That business saw great growth in part because it is more exposed to some of the geographies that came back last quarter. So the opening of Asia is more impactful for our <unk> business.
And America et cetera. So some of it is geographical mix that youre seeing there, but definitely we expect our b to b business to continue to grow I think I said a few years ago. This was an area. We saw lots of opportunity that we were going to push into so we expect and we'll be driving as much growth. There as we can again to fill in the pocket.
<unk> of demand that we would not otherwise reach through our BDC business, but absolutely we expect our beauty business to accelerate as we get through this major surgery. We've done over the last few years, which has taken a long time and is painful but as we get across we are in a better and better position everyday to accelerate we've got a few.
Over these last lift to get through for sure, but hopefully we're on the back nine and we're close to the end of that and we can put all our resource technical product design resource against accelerating growth. Once we are across these things so.
So we do expect.
I'm not going to say I expect <unk> to be the slowdown to DTC I expect <unk> to accelerate and I expect both businesses to grow well in the coming periods.
And from a capital allocation perspective.
Our approach hasn't changed we did sort of lay out the targeted leverage ratio. This time just sort.
Sort of give disclosure to what we internally are are striving for and we will make progress towards that this year and going forward, we can make progress towards that with EBITDA growth and potentially some small paydown of debt.
It won't take much given how much we've already reduced our debt levels. So all that to say with strong EBITDA strong free cash flow, we have a lot of cash available to be able to deploy to buybacks as we have done with our largest one to date.
Our largest wants to date, we've got about $600 million. This year, so there's still ample room and availability to be able to buyback and as long as our stock is trading at the levels. It is relative to what we know the long term performance of this company is going to do we will continue to do that opportunistically.
Great. Thank you.
Okay.
Our next question comes from Eric Sheridan with Goldman Sachs. Please go ahead Erik your line is open.
Thank you so much for taking the question is how much of a focus with investors tends to be on the North America market and and you made some interesting comments about some of the international markets on this call. So far can you give us an update on your view on where you sit competitively and how you think about the investment cycle to drive growth away from North America.
Maybe through the lens of some of the <unk> initiatives and some of the refocused brand initiatives. So we have a better understanding of that thanks.
Sure.
Let me kind of work backwards I think.
<unk> B to B is a great business, a great tool for us to reach pockets of demand as I said that we don't otherwise reach or reach well that might be geographical like China. For example, where we have where we expect a good rebound there and we have a nice book of business with partners in China.
Or it might be a loyalty program in a market we're already in but that has a captive audience. That's burning points in our bank credit card program or something so that business definitely gives us ways to participate in and travel economies that were not otherwise sort of going head to head in the BDC side.
But as we talk about the BDC side, we've had presence in many markets around the world.
Some of which we are just as Lee and then two as we've ever been and some of which we are as we've talked about in prior periods, we pulled out of because the economics just weren't worth it we were losing money and not gaining.
Retaining both share I would say without having to continue to spend and lose money. We believe what we had to do and what we've been doing is building a better model a better product a better go to market marketing strategy that helps us acquire the right kinds of customers who value what we have which is the best product the best loyalty program the best server.
This in the category and that May or may not be every customer in the world, but we believe we can target those customers and lots of geographies.
There are big pockets of them that we don't touch right now that are opportunities and there are also pockets of them that we used to touch less efficiently that we think we can go back to with strength. So I think youll see us it's not going to be a huge story in the numbers. This year, although we have seen a great come back in in EMEA, and Asia, and Latin America, where.
We do participate.
But.
It's a bigger story over time as we get our <unk> launched on as we get our product complete and as we can start to move our strategy more holistically into new markets and target the right customers for us.
Great. Thank you.
Yeah.
Our next question comes from Lloyd Walmsley with UBS.
Please go ahead your line is open.
Hi, Thanks for taking our question. This is Chris on for Lloyd maybe the first question on just as we think about the 23 double digit growth guidance on both the top and bottom line. Just philosophically. How are you. How do you think about potentially showing letting upside flow through on hydro the topline or bottom line for this year.
And then.
Second just going.
It sounds like things are turning around in the air product just can you talk a bit about how you think about <unk> as a separate funnel potentially for driving room night growth from here. Thanks.
So as far as the guidance I didn't hear all of what you said, but I think basically the question is is what gives you the confidence to be able to hit the top line and the bottom line guidance, which does include margin expansion.
I mean, it's several things Peter alluded to many of them, but I mean, obviously it starts with the travel industry strength of traveling seems really strong everyone's reporting great numbers.
And so clearly the consumer is prioritizing their spend on travel.
Seeing it in our own business with the success, we're seeing with the brand Expedia business with a 30% growth in gross bookings and then hotels dot com getting on that platform and at post migration now driving 20% increase in gross bookings, we have a <unk> business, that's growing 55%, which is a halo for the <unk>.
The business, we have Q2, we're at the moment, where we've got to address this tougher year over year compare and we're going through the verbal migration, but when we come out the other side there will be on the same platform that is delivering that same sort of double digit growth and so we're excited to see that and then on top of everything else, we're doing with the growing loyalty member base grow.
<unk> App user base and all of the goodness that will drive in the back half along with all of our tech and product initiatives. That's what gives us the confidence that we're going to be able to hit this guidance on the full year.
And now I'll just take the second part on there.
We've been innovating a lot on air now it's important to remember since you now if you go back pre COVID-19.
We sold the Gensia, our corporate business into Amex, GBT, and we and we got out of the air business with our partner Chase. So there's there's some weird comps. If you go back in history, but if you look at the air product I think we've made huge progress on it as a product you'll find we have price tracking and <unk>.
<unk> now and most of the world that's been a great engagement product. It has helped with conversion it's helped with attached sales of hotels and other things.
<unk> increased our speed, we've got smart shopping, which is a new capability of comparison shopping.
Looking looking at.
The best seats in the different.
Economy basic economy et cetera, and comparing more easily we use.
Use AI to suggest the best option for each customer. So all of these things are in the worst we've improved our search speed.
Considerably recently, so theres a bunch of work going on to make that product the predominant product in this space again.
And I think we.
We definitely look at it as an opportunity.
<unk> unique capability is something we've always been strong and something we can drive traffic through we have a lot of opportunity to improve our attach rates in our packaging. If you will we have terrific package rates for many of our partners and we've just started deploying as part of the run up to one key.
Remember our flight member discounts, which we've never had before which is a great opportunity for airlines too.
You use their pricing to help get the best customers out of our marketplace. So I think theres a lot of things that had been in the works and coming in and again. This is just one of the areas where I say the technology has been evolving through this period and it's all getting to a place where it can be much more effective and we haven't spent much time on it but obviously once everything's on.
The same stack, we start to have a unique capability to start moving more products across brands. So things, we've talked about before like better selling our verbal content on our OTA brands and through those points of sales becomes a reality.
Selling verbal contact through our <unk> partners Theres, some vacation rental content in our OTC brands that isn't on a verbal Scott. So we will have that consolidated so there as well.
Off of opportunities that come from this migration that are all in certain areas one of them and we've done a lot there, but but there are many.
Okay. Thank you.
Okay.
Our next question comes from Jon Cohen plenty with Jefferies. Please go ahead, John Your line is open.
Hi, This is Chris on for Jonathan Thanks for taking my question can you double click on the commentary from last quarter.
Margin expansion throughout the year, maybe just give us a sense school come off line items, we should expect that.
I'm from and then help us.
Hi.
What youre anticipating as well thank you.
Yes, I mean as far as margin expansion as we move throughout the year I mean, certainly as we deliver more top line growth and right now we're in sort of more of a mode of driving gross bookings, where we don't get the benefit of that revenue into earnings until the stay and it's all in the back half with this outperformance that we're seeing today, we expect to have that benefit the P&L and of course, we are.
We're expecting marketing leverage as we move throughout the year based on all the things we talked about that we're going to benefit from so it's really those two lines, we're going to be obviously working on efficiencies across the company as we deliver on our tech stack and start to be able to repurpose individuals and cut costs and things like that and that'll also.
<unk>.
Some efficiencies, but it's really the topline revenue growth and the marketing efficiencies in the back half and I would just add one thing which is you know the shape of the curve. This year is we have a lot of work to get done and that involves a lot of people being dedicated to these big lifts, but as we get towards the end of the year.
A lot of that work.
<unk>, so that we can take those people and great talent on growth initiatives that are more near term generative. So that's part of what happens as we every time, we put something to bed, we get more resource available to drive conversion growth to drive improvement in the customer experience it turns into money. So so that the.
GNC, we get going forward once we're over these big lifts as much bigger you know how much of it hits this year versus future years.
TBD, but that's the journey. We're on is we've got to get over these big Humps and then we start there we've seen it already when we did the hotels dot com conversion migration, we freed up a lot of talent to work on near term conversion wins and it's been hugely productive for US again every time, we do one of these we get more capability back to.
Put against more near term uplift in the business and so that's where we start to get more separation relative to the cost base and that's partially this year, but it's obviously more going forward.
Very helpful. Thank you.
Okay.
Our next question comes from Tom Champion with Sandler.
Please go ahead your line is open.
Hi, good afternoon, thanks for the questions.
Just any interesting observations behavior early on.
GPT plug it maybe too early but just curious any any comments on that.
This is self evident.
And your application, but the tech re platforming will be ostensibly complete in the U S. In July with the launch of <unk> just curious if thats. The case and then maybe just a final one for Julie.
Was a little surprised by the outsized impact of FX on EBITDA and <unk> curious if you could elaborate on that or add any details. Thank you.
Thanks, Tom I'll try the first couple of so you said, the GPT, which at GPT plug in which is that is where we have made.
We've made a plug in for their environment. So that when people are searching thinking about travelling their environment and want to see if there are hotels near the Eiffel tower, what's rightfully from L. A to New York on Tuesday.
If they have our plug in we can provide that that is still only available in the paid and the developer environment. So it's not like out in the wild.
Small still but interesting to see how people behave if people are using it in.
Obviously, it's not materially changing our numbers, but it's definitely a lot of interesting learnings for US. We've also deployed which may have been which Matt into our own iOS app and that's to allow people to essentially use the capability in our app to do a similar thing you know what hotels or near the Eiffel tower or whatever they might be searching for.
Yeah.
And what we do then is if if chat GPT provides answers and it's a series of hotels, we will take those hotels to save those hotels, where people. So that they can then go shop comparison shop look at images do whatever they want.
Again early days, but people have engaged with it it's been interesting to people not a huge driver yet and that's why I say, we don't know how big a driver it is going to be in behavior, but it's definitely interesting and I'll just add.
We wouldn't be the only company in the world, but we are on the forefront of looking at other ways, but large language models can help other parts of our experience whether it's.
<unk>.
With our partners, whether it's turning descriptions into.
Property descriptions, making that easier for people. There's a lot of ways. We think we can look at using AI in this.
Construct but we use AI and machine learning and a lot of other construct as I talked about whether it's optimizing pictures or anything else. So.
It's interesting it's early and we'll see and we'll see you know when a when the plug in is available to a wider audience what it drives and we'll see what JBT does to the search environment, We love to see more competition in global search.
So we're rooting for her more competitive search environment and.
And we think we are staying on the absolute front of what anyone's doing in travel with large language models.
As far as the Tech re platforming goes yes. The answer to your question is yes. The last of the big things in the U S is really to launch <unk> now.
Our launches as a launch and sometimes it takes a little time to harden that and make sure everything's working perfectly, but yes, essentially once <unk> is done in the U S. That's the last of the sort of big.
Boulder lifts, we've had now we want to want to launch <unk> in more places.
There's work to do to complete the set if you will as we complete the geographical set of capabilities and so forth, but in terms of the really big lift on the biggest piece of our business that will be the last of the lifts and that's why I say I think we have a lot more.
Talent available to drive other things once we're over that hump.
And as far as FX, obviously, it just really depends on which currencies, we are transacting in and their relativity to the strength of the US dollar and the difference between the Delta on the top and the bottom line is really just a function of Q1 as our lower earnings quarter and so it has a more pronounced impact on the lower level of earnings relative.
At the top line is obviously much bigger numbers. So it's just it's a function of math.
Got it thank you both.
Thank you.
The next question comes from Mario <unk> with Barclays.
Please go ahead your line is open.
Great. Thanks for taking the question. So the first one follow up on one key.
It's rolling out in July .
Is that a global rollout.
And then is there like a rough timeframe, we should think about in terms of when we.
We should see the benefit of it.
Loyalty program I understand that take rates will take initially once.
Thanks, Alright, redeemed, but just curious how we should think about the expected payback period.
Sure. Thanks Mario.
So yes.
Yes.
We're rolling out in the U S first.
We will rollout in the rest of the world.
More later in the year and next year.
You should keep in mind there are differences in the rest of the world where in some cases not all brands are present in some cases, we have a different brand and we love one of our brands. So.
So they will take on slightly different flavors across the world, but the U S. Obviously, it's the biggest proof point in the biggest place in which we think the installed base gets the biggest lift and as far as that payback goes obviously loyalty is a thing which drives future repeat future loyalty future engagement.
And as you know we've been focused on signing up as many even before <unk> on getting way more of our customer base sign being signed up and engaged with our product now at least of all because they see the best prices that way.
They get rewarded for their travel and they have reasons to come back so.
We've modeled that a lot of different ways.
It's difficult to say how quickly it pays back given that travel for most people is a one five times a year kind of endeavor.
On average now obviously there are people, who go 20 times a year like everybody on this call probably but.
So we will see we've modeled it a series of ways, but we don't expect a huge payback in this year. We think some of it will come back this year and some of it will come back in the future and it will keep building on itself and as we've said before our intent is between all of the levers we have of spend via direct sales and marketing you know paid.
Search.
Discounting loyalty and everything else, we view that as one pool of capital and we intend to balance between those pools. So as we as we provide more loyalty, which will drive again, some longer term payback than the short term paid search stuff.
We will pull it out of other spots to accommodate that and live within an envelope of spend that we think is right.
In terms of what we should be spending all up against you know against buying that future business. So again, it's a little bit of timing dislocation compared to that quick twitch muscle of <unk>.
Performance marketing, but we think well worth it and again, we are going to go up a whole millions of customers and verbal that used to live outside our loyalty plan that will all of a sudden be able to spend into our loyalty plan, whether it's for a different kind of trip or something else and likewise all of our existing loyalty members and Expedia and hotel.
Dot com will be able to use their points against.
Vacation rentals, so theres a lot of.
A lot of things that could be shorter towards a lot of things that will be longer and we've modeled that a bunch of ways, but we'll see we don't have too much of the benefit coming in in this year.
Got it thanks, Peter and just one.
Really in terms of the <unk> commentary on the top line mid single digit any color in terms of the drivers.
To get to that in terms of.
Level of bookings growth our take rate we should expect.
No we didn't go into that level of detail I mean, obviously, it's a tough compare I think for a lot of companies for for next quarter, given the immediate rebound and travel post <unk>. So that's the biggest driver that's bringing us down to the single digits and of course as we've been talking about we're doing the bareboat migration during the same time period.
Those are the two real big drivers and so I wouldn't.
Think about anything else.
At play there.
Got it thank you.
Our final question today comes from Jed Kelly with Oppenheimer. Please go ahead Sir.
Hey, great. Thanks for sneaking me in just two questions just on the verbal migration you called out are you seeing any pressures from sort of the vacation rental market is having.
All at three record years, and now people being able to travel to other other destinations and then just my second question relates to supply can you just give us a sense how your verbal supplies trending and then you're supplying some of the international markets, where we aren't supply. Thank you.
Yes, thanks for the question Jed.
If you missed it I mentioned it but yes, we have seen a little bit of flattening in demand in VR and that is largely because of the length of stays have shortened people are going to cities more than they're going to.
Going too long extended beach.
Covid Arab beach vacations or mountain vacations, where they took a months and went wherever so that's definitely changed hybrid where exchange. So all of those things are impacting macro demand slightly now much of it is going back to cities are in RBR business, we don't participate as much in the urban market, though we do have good product there I mentioned.
That before but we actually have good urban market product and our OTA brands, but it's not in our verbal brands. So one of the things that the verb migration brings us is the ability to get all that content together and that actually will help a lot and as you think about supply because we've had a kind of in pockets as opposed to all available everywhere.
And that makes a big difference and so by having said that we've grown supply well in our verbal and again in our core product, which is for home or apartment.
And is focused not on shared spaces or any of that but we've had good solid growth throughout the period and we continue to add product. They are principally focused on places where we've seen the most compression overall in the world. We're not trying to break brand new ground, where we don't have demand.
But we have seen solid growth in supply will continue to push into that but I think the biggest unlock for us will actually come when we get the verbal migration done in all of our supply can move really to any point of sale and any endpoint in our branch system and that's that's a you know it will take us.
While the optimized so don't think that's like a moment in time inflection point, but that's a big that's the biggest opportunity for us to amp up our supply and revealing better to the demand in the market.
Thank you.
Sure.
And with that thank you everybody I think that was our last question. Thanks for joining US we'll see you next quarter take care.
This concludes today's call you may now disconnect your lines have a nice day.
Okay.