Q1 2024 Airbnb Inc Earnings Call

Good afternoon, and thank you for joining Airbnb earnings conference call for the first quarter of 2024 as a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Airbnb website. Following this call I will now hand, the call over to Angela Yang director of Investor Relations.

Angela Yang: Please go ahead.

Angela Yang: Good afternoon, and welcome to the Airbnb is first quarter of 2024 earnings call.

Angela Yang: Thank you for joining us today.

Angela Yang: On the call today, we have Airbnb co founder and CEO, Brian <unk>, and our Chief Financial Officer early March.

Angela Yang: Today, we issued a shareholder letter with our financial results and commentary for our first quarter of 2024.

Angela Yang: These are also posted on the Investor Relations section of Mrv's website.

Angela Yang: During the call, we'll make brief opening remarks, and then spend the remainder of time on Q&A.

Speaker Change: Before I turn it over to Brian I would like to remind everyone that we will be making forward looking statements on this call and involve a number of risks and uncertainties.

Angela Yang: Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors.

Brian: These factors are described under forward looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission.

Speaker Change: We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances.

Speaker Change: You should be aware that these statements should be considered estimates only and not a guarantee of future performance.

Speaker Change: Also during this call we will discuss some non-GAAP financial measures.

Angela Yang: We've provided reconciliations to the most directly will directly comparable GAAP financial measures in the shareholder letter posted to our Investor Relations website.

Angela Yang: These non-GAAP measures are not intended to be a substitute for our GAAP results.

Angela Yang: With that I will pass the call to Brian.

Brian: Got it.

Brian: Alright, good afternoon, everyone and thanks for joining.

Brian: Airbnb had a strong start to 2024.

Brian: We had 133 million nights and experiences booked in Q1, marking our highest first quarter ever.

Brian: <unk> was $2 $1 billion grew 18% year over year, primarily driven by continued strength in travel demand and the timing of Easter net.

Brian: Net income was $264 million, representing a net income margin of 12% for.

Brian: For Q1, our free cash flow was $1 9 billion.

Brian: Our highest ever.

Brian: And for the trailing 12 months, our free cash flow was $4 2 billion.

Brian: Representing a free cash flow margin up 41%.

Brian: Our strong free cash flow allowed us to repurchased $750 million of our shares in the quarter.

Brian: And as of the end of Q1, we had $6 billion remaining on our repurchase authorization.

Brian: During Q1, we made significant progress across our three strategic initiatives, which are making hosting mainstream protecting our core service and expanding beyond the core.

Brian: We're making hosting mainstream.

Brian: We remain focused on making hosting justice popular is traveling and airbnb and to do this we are raising awareness around the benefits of hosting providing better tools and helping us deliver high quality stays.

Brian: As we grow we're also taking action to rapidly improve the quality stays on airbnb in.

Brian: In Q1, we removed thousands of listings that failed to meet our guest expectations and excluding these renewables active listings for accommodations grew 17% year over year.

Brian: Also saw sustained double digit supply growth across all regions.

Brian: This year.

Brian: We will continue to raise awareness around hosting and improve the overall host experience.

Brian: Second we are perfecting our core service.

Brian: Over the past few years, we've rolled out more than 430, new features and upgrades to improve our service.

Brian: In November we took another huge step for a number of liability with the launch of guest favorites.

Brian: Alexian of the top homes on Airbnb based on ratings reviews and reliability.

Brian: Now since launching guest favorites.

Brian: <unk> been more than 100 million nights booked at these listings.

Brian: And we will continue to make it easier for guests to find high quality and affordable states.

Brian: Finally, we're expanding beyond our core <unk>.

Brian: During the quarter, we continued investing in less mature markets to unlock more growth.

Brian: In Q1.

Brian: Most nights booked in our expansion markets grew twice as fast as our core markets and we're also focused on expanding beyond our core business now this will be a multiyear journey and we've already begun laying the foundation.

Brian: Last week, we introduced icon.

Brian: A new category of extraordinary experiences by the greatest needs and music film sports and more.

Brian: Icons Mark an important next step in helping people understand the airbnb offers more than just travel accommodations.

Brian: Now before I share a few business highlights I just wanted to provide some context on why we actually introduced icon because they deliver on three key objectives.

Brian: First.

Brian: Icons keep airbnb brand relevant and top of mind.

Brian: With new icon launching throughout the year, we can introduce more people to airbnb and highlight what makes us unique.

Brian: While everybody's brand is already recognized around the world there are specific segments, where we want to accelerate growth.

Brian: And with a broad range of icon spanning various geographies demographics and fan basis, we will be able to reach key segments in a more targeted way.

Brian: Third.

Brian: Icon help change the way people think about Airbnb and what we offer.

Brian: This is going to be critical as we expand beyond accommodations in the coming years.

Brian: Now it's still early but we're really excited about the response, we've seen to eikon so far.

Brian: And just one week.

Brian: <unk> launch has generated over 8100 pieces of global media coverage.

Brian: And 371 million social media impressions and the coverage has been overwhelmingly positive.

Brian: Now <unk>.

Brian: Just to put this into perspective.

Brian: Icon has already generated more press than our IPO.

Brian: It's clear <unk> resonate with people.

Brian: Now.

Brian: Looking back to Q1.

Brian: <unk> got a number of positive business highlights first.

Brian: Burst mobile App mobile downloads are accelerating.

Brian: So to quickly zoom out native experiences booked in Q1 increased nine 5% year over year. Despite hard copper at this time last year, and we were particularly encouraged by the growth of App downloads in the U S. App downloads increased 60% in Q1 compared to a year ago and global nights booked in our App increased 21% year over year.

Brian: And they now represent 54% of nights booked during the quarter and this time last year.

Brian: Mobile bookings represented only 49% so it went from 49% to 54%. So we're seeing some really really good traction.

Brian: Second.

Brian: Airbnb is sweet positioned for special events.

Brian: Special events is really how we started airbnb, we really started it provide housing for conferences and events.

Brian: And in April we had over 500000 guests stay on Airbnb during the SLR trips in North America, and Interestingly, we saw more than twice as many nights stayed on Airbnb.

Brian: Along the direct path of the eclipse compared to the year prior with many of these locations in areas that don't even have hotels.

Brian: Nice booked in Paris during the Summer Olympics.

Brian: Five times higher than this time, a year ago in Germany is also seeing a similar trend for the Euro Cup. This summer with nights booked nearly double compared to a year ago.

Brian: Now supplies also increased to meet the higher demand, including nearly 40% more active listings in Paris in Q1 compared to a year ago.

Brian: And finally.

Brian: Supply growth remains strong.

Brian: Mentioned earlier in Q1, we removed thousands of listings that failed to meet our guest expectations and excluding these removals.

Brian: Active listings for accommodations grew 17% year over year.

Brian: We continued to see double digit supply growth across all regions with the highest growth in regions with the highest demand.

Brian: Urban and non urban supply increased at about the same rate and.

Brian: And we saw relatively similar supply growth among individual professional hubs with the majority of new listings exclusive to Airbnb.

Brian: We're really proud of our strong Q1 results and we're looking forward to another record summer travel season, so with that early and I look forward to answer your questions.

Brian: We will now begin the question and answer session, if you'd like to ask a question Press Star then the number one on your telephone keypad. We ask that you. Please limit your questions to one and one follow up our first question will come from the line of Mark Mahaney with Evercore ISI. Please go ahead.

Mark Stephen F. Mahaney: Thanks, you talk about these kind.

Mark Stephen F. Mahaney: Kind of leaning into these kind of less mature markets and this doubling of growth rates.

Mark Stephen F. Mahaney: And some of those expansion markets versus your versus your core markets could you give a little more color on which countries in which markets that is which countries I think in the past I think you may have mentioned, Brazil, but which ones youre leaning into this year and then secondly that U S. App downloads increase of 60% year over year. That's that's our extremely high number for what you would think would be a reasonably well known.

Mark Stephen F. Mahaney: <unk> App and brand so what drove that do you have any do you have any whys behind that thank you very much.

Speaker Change: Yeah, Hey, Mark why don't I start.

Speaker Change: So leaning into a less mature market. So if you think about Airbnb, where obviously in 220 countries and regions, where one of the most global brands in the world, but our more mature markets at the highest penetration would be U S, Canada, Australia, France and UK. So those five so the next markets those are.

Mark Stephen F. Mahaney: Biggest potential Tam would be I mean.

Mark Stephen F. Mahaney: That would be like Mexico, and Brazil in Latin America, and Europe would be Germany, Italy, Italy, Italy, Spain. We're also starting to see some traction like Switzerland and Netherlands.

Mark Stephen F. Mahaney: And.

Mark Stephen F. Mahaney: In Asia, It would be Japan, Korea, it would be China, and eventually a little bit longer gain would be India. So these are a few others.

Mark Stephen F. Mahaney: Latin America.

Mark Stephen F. Mahaney: I could kind of keep going but those are those are kind of some of the really really big travel Tan and Mark maybe just one other thing I'll just say like.

Mark Stephen F. Mahaney: I think a really good thing to look at is our penetration for each country and while U S. Canada, Australia, a really really similar there is a really really big drop off in a lot of these other markets that are huge travel times, I mean, especially in Asia and one of the things that we've learned is that they are going to be pretty much resonates pretty equally everywhere. Once there is the awareness.

Mark Stephen F. Mahaney: I could argue that airbnb might resonate better in Asia, because it's the younger travel population thats, not predisposed hotel and around social media and we are disproportionately on social media versus our competitors. So I'm very very bullish about that now on U S to app downloads, you're right I mean, it was it has grown 60% last year.

Brian: 49% of bookings at 54% of bookings so at the highest level of Mark what drove that was just focused on our roadmap.

Brian: We have a brand that most everybody at least in the United States has heard of and a lot of people download our app, but we've never really focused on optimizing our app from a download perspective and just to be clear. These numbers were driven organically not by paid advertising. So it was really just a lot of optimization different touch.

Brian: Points encouraging people at the right moment to download our app not being intrusive, we had pushed a lot of people too Jeff.

Brian: Pushed them to our mobile website, our mobile website does not convert nearly at the rate of our app download and so maybe maybe the highest level point I'll just make is.

Brian: I think what we've been able to prove the last three years and we focus on something we can drive the numbers two years ago supply wasn't growing or are you focused on it it's now growing 17% net quality.

Brian: Year ago, we were we felt like app downloads weren't where they needed to be we put a team on it. They focus so I think we're developing a good track record to really be able to move metrics we focus on.

Speaker Change: Thanks, if I could just add I think the app download effort is really just part of our broader priority around protecting the core and optimizing the core business, we identified that not as many of our guests we're using the app as they should and we know that the app is a much better user experience than the web. So it's again part of the broader suite.

Speaker Change: Roadmap items that are intended to.

Speaker Change: Trails and protect the core experience.

Speaker Change: Thank you Ali.

Speaker Change: Thanks Mark.

Brian: Your next question will come from the line of Richard Clark with Bernstein. Please go ahead.

Brian: Hi.

Richard J. Clarke: Good afternoon. Thanks for taking my questions. Just on you mentioned on the prepared remarks, you mentioned that Q4 to Q1 would have quite a tough comp.

Richard J. Clarke: And Thats calendar effects in there as well, but you are guiding the Q2.

Richard J. Clarke: Going to be flat on room night growth. So is there anything you'd call out in.

Richard J. Clarke: Q2 is maybe holding that back and how we should think about the rest of the year and maybe just a similar question on margin the Q2 guide I.

Richard J. Clarke: I guess, a little bit softer than consensus had some calendar and that is not including any of the growth investments you talk about or are those things that may come in more of the second half of the year.

Speaker Change: Yes, Thanks, Richard Let me just talk a little bit about the trends that we've seen year to date to help answer. Your question. So first as you point out as we were heading into 2024 and we were widely aware that last January was particularly strong and so the guide that we provided back in February included.

Brian: Step down in growth from Q4 to Q1 that was reflective of that hard comp from.

Speaker Change: A year ago, we did experience it and then since then we've seen relatively stable growth, which IC.

Speaker Change: Frankly, a really strong statement in terms of both the stability and resilience of leisure travel demand. So far this year I think something that we've seen this year that is contrast to last year is last year. There was a lot of volatility in terms of the timing of when people book relative to the second.

Speaker Change: So far this year, it's been frankly, much more stable lead times on our platform have been.

Speaker Change: <unk> generally in line with a year ago and it just hasn't been at the same level of volatility again that we saw a year ago and so heading into Q2 and our guidance reflects this continued stability of bookings, obviously, we'd like to deliver higher growth and stable growth, but our outlook obviously risk.

Speaker Change: Flex the trends that we've seen quarter to date.

Speaker Change: To your question on Q2 margins, obviously, we guided.

Speaker Change: The Q1 results reflect a pretty meaningful year over year margin expansion a big portion of that is due to the timing of Easter Easter is not only a benefit to revenue growth in Q1, but it's obviously also a benefit to margin expansion. Those two factors reversed in Q2 it is.

Speaker Change: A headwind to revenue growth and it is a headwind to overall margins.

Speaker Change: Two other components in terms of whats putting pressure on margins in Q2.

Speaker Change: One is just some onetime credits that we had in payment processing a year ago that will not recur. This year and then third we shifted slightly the timing of our marketing spend a little bit heavier in Q2 than in Q1.

Speaker Change: That will be reflected in terms of marketing as a percent of revenue growing in the quarter on a year over year basis.

Speaker Change: Very helpful. Thank you.

Speaker Change: Your next question will come from the line of Jed Kelly with Oppenheimer. Please go ahead.

Jed Kelly: Hey, great. Thanks for taking my question just one on ADR as they seem to be seem to be relatively sticky and take a couple quarters ago, you talked about driving value to the consumer. So can you just give us an update on <unk>.

Jed Kelly: Where you are in sort of some of your value initiatives that our supply great supply growth again can you talk about how we should think about supply and nights eventually converging to similar growth rates. Thank you.

Speaker Change: Yes, Hey, Jed why don't I take the first one and on value initiatives and I'll, let Alex take the second one so on providing value.

Speaker Change: When we started Airbnb are original tagline was a cheap affordable alternative to a hotel and the majority of the primary reasons people came to US is because it was a better value than a hotel and we still think that's a core value proposition that we have to offer now a year and a half ago. We noticed that there was a lot.

Speaker Change: A lot of concern about F&B prices, increasing and so we created a whole team to identify a series of initiatives to model modulate modulate our prices and they are working and I'll go down the list.

Speaker Change: One is total price display so as you know in travel, especially on my travels a lot of progress this fee disclosures.

Speaker Change: And we decided to add a toggle right on the homepage that you can turn on to show the total prices by <unk>.

Speaker Change: Since we've done that not only do consumers not only our consumers going towards the best total value, but it's begun to change behavior in our host community because 300000 host.

Speaker Change: Say have removed or lowered their cleaning fee as a result side with the first thing we did.

Speaker Change: The next thing we did is we started offering monthly and weekly discounts and much more robust tools for that now this is important because nearly half of our nice booked our first days of week or longer and now more than two thirds of our of our of our host offer a monthly or weekly discount. We also noticed that a lot.

Speaker Change: Host that werent getting booked weren't getting booked because the prices were too high and they just didn't have a really good comp sets. So we created a tool called the compare listing tool where people can see how much other people are charging the neighborhood and they can actually see people who are getting book not getting book and no surprise that people are getting book generally have lower prices. So we have nearly 2 million.

Speaker Change: Host that now use the compare listening tool. So theres just a few of the initiatives. We've done we actually have many others as well the net of all of it is that hotel prices are up year over year and Airbnb listings on a like for like basis are down. So today the value of Airbnb versus the hotel is better than it was a year ago and I think that trend line is going to continue.

Speaker Change: Given all of our efforts and maybe the only other thing I'll just say on this is.

Speaker Change: As we know lots of supply and demand as supply grows faster than demand prices go down a little bit is the pie is growing faster than demand I think thats also relieving some pressure early over to you.

Speaker Change: Yes, so to your question with regard to the relative growth rates of supply and demand just a few comments I would say first something that we've shared previously is that in any given quarter, we would not expect supply and demand to grow exactly in line, but when we look over a longer time period, either the last decade or more specifically.

Speaker Change: <unk> from pre pandemic two today, what we do see is that over over a period of years. They do grow generally in line that I would say that continues to be the case.

Speaker Change: And where we are right now I would say we are very encouraged to be able to deliver this continued level very solid strong supply growth for a couple of reasons I would say one we know that more unique differentiated supply wins and differentiate why is why people come to Airbnb I would.

Speaker Change: Second Brian made this point, but growing supply allows us to.

Speaker Change: It really benefits our affordability measures in that more supply obviously that gets more competitive pricing and then I would say third relevant to our recent quality initiatives, we see it as an opportunity for growth as supply growth is stronger than demand growth for us to continue to be driving quality. What you saw in the core.

Speaker Change: We obviously did some one time takedowns of supply that frankly, just did not meet our expectations.

Speaker Change: Fact that supply is growing so rapidly it allows us to make those.

Speaker Change: If you will to the supply base entity continually upgrading the level of quality that we deliver to our guests.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Ron Josey with Citi. Please go ahead.

Ronald Victor Josey: Thanks for taking the question Brian I wanted to ask you about search on Airbnb just following the the strength and the benefits of guest favorites I wanted to better understand sort of purchase about post guest favorites, how search and really conversion rates have improved and really how you feel how you feel search can can just evolve over time and then as a follow up.

Speaker Change: We're just talking about around inventory quality, we'd love to hear just the process to ensure the quality listings continue to come on the platform I think we've talked about verified listings and trophies, but any other thoughts there would be helpful. Thank you.

Brian: Yes. These are really really great questions, Ron until you, let's start with search.

Speaker Change: So.

Speaker Change: We did approximately $10 billion last year in revenue. So the way to think about this is if we can just drive an incremental 100 basis points in growth that's $100 million. So like the way we look at R. R.

Ron: Our conversion rate is like we have teams dedicated to the search experience and we over the last year, we last 12 months.

Ron: Likely driven at least a few hundred basis points of incremental growth just through optimizations of the search flow because we just got so much traffic.

Ron: And so just to call out a couple of things that we did I mean, there's been dozens and dozens I'll just name a couple one already mentioned.

Ron: Mobile App downloads now why the mobile app downloads lead to also more bookings because the conversion rate on native application is typically a lot higher that mobile web site.

Ron: Number two.

Ron: Just just to give you a couple of examples.

Ron: One of the challenging Airbnb compared to hotel is.

Ron: You may type in a location and certain dates and.

Ron: Maybe you're on vacation and you don't see exactly the home you need and you might Napoca home you might now open to different App and we had this carousel. That's basically offers hey, if you change your dates by one or two days. Your other listing you can find and that led to a huge increase in bookings we made improvements to film.

Ron: <unk>, we've made improvements to search input the search box, making the search box more prominent so there are quite literally dozens and dozens of improvements that we've made and IC.

Ron: Hundreds of basis points of incremental growth just through essentially optimizing the end to end guest flow for our core business. So it's really really exciting and.

Ron: A couple of big areas would be maps and location theres, a huge opportunity around around that area.

Ron: So that's on search on inventory and quality. This is a great question I mean, we have.

Ron: Really extensive roadmap.

Ron: Last year, we launched guest favorites as you know in November 100 million nights booked have been booked through them I would say the sponsor guest favorites is even greater than I anticipated, we're seeing more people mentally book guest favorites.

Speaker Change: We're seeing that guest favorites have a fraction of the trip issue of contact rate is non guest favorites. So guest favorites have between a fifth 10th the contact rate as our bottom quartile listings and the re booking rates are much higher and I also think we'll get favorites is doing is it's changing behavior to encourage.

Speaker Change: <unk> hosted become better and so after that we launched quality highlights in March quality highlights basically what happened was a guest favorite the top 2 million listings Airbnb.

Speaker Change: People are saying well, how do we know which are the best within those $2 million. So we did as we have top 1% top 5% top 10% Trophy classification and this is also really I think popular guest we've now removed hundreds of thousands of listings and we are going to be doing a number of new things one of the things we're experimenting with.

Speaker Change: It is selling to percentile.

Speaker Change: Something falls in our quality distribution as a percentile basis and.

Speaker Change: And then continually adding a lot more supply and then tightening up our quality control and really giving a lot more feedback to host to become better I think thats a really good opportunity here.

Speaker Change: A lot more listings and guest favorites and to provide host education host tools for the hosts that are struggling to be much more successful. So there's a pretty big an extensive roadmap to go and just just the last thing I'll say about this is as big as Airbnb is and we're approaching half a billion room nights, a year for everyone, who stays and airbnb somewhere around eight or nine.

Speaker Change: Stay in hotels.

Speaker Change: And when you ask people why are you staying in a hotel or an airbnb is typically more affordable it's a more local experience it's much better for groups and family people say, yes, but hotels are historically, a more consistent experience and so if we can just get one of those travelers from hotel sustainability that would double our size of our business to $1 billion. This year and so we think the quality and reliability.

Speaker Change: <unk> is a multi year roadmap, so youre going to be hearing every year major updates from us on quality and reliability.

Speaker Change: Thank you Brian Super helpful.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Eric James Sheridan: Thanks, so much for taking the question, maybe coming back and putting a finer point on some of the topics we've talked about already Brian when you think about your tap investment priorities for 2024 and beyond how would you categorize those investments if we put them in buckets, such as demand generation supply growth and platform and product innovation over the long term.

Speaker Change: And then that last bucket, how should we increasingly think about what you're learning about testing and deploying AI across the platform and how it might reduce friction over the longer term. Thanks, so much.

Brian: Yeah, Hey, Eric good to hear from you. So maybe I can just.

Brian: You had three buckets, maybe I can give you three slightly different buckets to give you our framework the way I think about deploying our resources and when I say resources, probably the most precious resources, we have in product and engineering resources and the way I think about that as we ever core business, we have international expansion and we have expand.

Speaker Change: <unk> in our core business of accommodation, so thats kind of the way, we think about our portfolio and you can imagine they're all totally different horizons. So.

Speaker Change: The majority of our people are still focused on the core business and I believe that we are just scratching the surface of the size of our core business within our core business. We typically have about three different areas of focus one I, just talked about which is quality and reliability.

Speaker Change: The next one's affordability, making sure airbnb or more Florida hotels, and the third is usability what I also talked about what search and reducing friction so.

Speaker Change: The first bucket of our investment and that really will pay off within this year and so there is that you can get a return on those efforts within a matter of months because a lot of that but there are a lot of those changes are software changes the immediate they touched 100% of our user base and they touch a very large.

Speaker Change: Our entire GBT next at the international expansion.

Speaker Change: So expansion is really supply demand and platform. It's all three within international and you could really bucket into two things we have to localize the product and then we have to have a global marketing strategy to like one market at a time.

Speaker Change: And we've done a lot of really good work over the last few years on international expansion, but I think at this moment, we are ready to step on the gas and by stepping on the gas I don't mean, its going to be a significantly greater investment, but much greater velocity, because we spend a lot of energy updating our products. So most recently we just.

Speaker Change: We just.

Speaker Change: We just updated arch our application in Asia, specifically in China, and we're bringing a lot of those improvements to Japan Korea, because the applications worked fairly similarly, and so getting these products onto a better standard is a really good first thing that you want to do before you actually step on the gas marketing international and of course.

Speaker Change: The final thing is expanding in our core business accommodation so.

Speaker Change: Dollars and number of people. This is by far the smallest area that we're putting people on now because it's a small base, but it's actually where I'm spending the majority of my time and I think the majority of the leadership time is now being spent focused on transforming the company from an accommodations business to a multi vertical for multi.

Speaker Change: Multi category company.

Speaker Change: And over the next three years Youre going to see this play out quite substantially so that's the way we think about core international and then expanding beyond our core.

Speaker Change: Great and then I think the other question sorry, I have to answer your question about how are you.

Speaker Change: How would it be learning about AI and reducing friction so.

Speaker Change: Just a couple of things in AI.

Speaker Change: First of all we've been using I asked for a long time in the last 12 months. We've made a lot of progress I'll just give you three examples of things we've done with AI.

Speaker Change: We've made it easier to host <unk>.

Speaker Change: Have a computer vision model that we trained a 100 million photos and that allows hosts to like the AI model to organize all of their photos by room why would you want to do this because this is Chris this conversion rate. When you do this number two we launched last week AI powered quick replies for host so basically predicts the right kind of question or answer for a host of <unk>.

Speaker Change: <unk> to provide.

Speaker Change: To guests and this has been really helpful. And then we've made a really big impact on reducing partisan Airbnb reservations screening technology. So now we're going much bigger on generative AI I think we're going to see.

Speaker Change: I think we're going to see the biggest impact is going to be on.

Speaker Change: Customer service in the near term.

Speaker Change: I think more than hotels, probably even more than OTI <unk> will benefit from generally the AI and the reason why it just as simple structural reason we have the most varied inventory, we don't have any skus and we're incredibly global platforms. So it's a very difficult customer service challenge, but imagine an AI agent that can actually read a corpus of 1000 pages.

Speaker Change: Policy and be able to help adjudicate and help and help a customer service agent help our guests from Germany, staying with the host in Japan, It's a very difficult problem and AI can really supplement overtime, we're going to bring the AI capabilities from customer service to search and to the broader experience and the endgame is to provide basically an AI powered constantly ours, so that's where it's going.

Speaker Change: But it's really really focused on customer service at this very moment.

Speaker Change: Your next question will come from the line of Brian Nowak with Morgan Stanley. Please go ahead.

Brian Thomas Nowak: Thanks for taking my questions I have two just to sort of come back to a couple of the topics we talked about.

Brian Thomas Nowak: Okay.

Brian Thomas Nowak: The comp did get easier so with the comps getting modestly harder in the back half can you just sort of walk us through maybe micro levels of innovation that can sort of drive stability or how do we think about reasonable ranges of outcomes for room night growth in the second half and then the second one Brian you talked about how like for like.

Brian Thomas Nowak: Pricing is more attractive versus hotels, but I don't have the transcript exactly yet, but if I look at Marriott and Hilton and Theyre ADR as are up 2% to 3% and your radios are also up 2% to 3% is there something else that you're seeing where the relative pricing is actually becoming more attractive. If you can help us understand a little bit more thanks.

Speaker Change: Yes, why don't I take the second question I think Brian either you or I cut out. So we didn't hear the first part of your question.

Speaker Change: So I wanted to just repeat the first question yeah, Yeah, absolutely yes.

LTE: The first question was more for LTE, where she talked about how you have stable room night growth now, but I think the the comp is a little bit easier from <unk> and with the comps getting a little more difficult in the back half can you just sort of walk us through some reasonable ranges of outcomes of growth in the back half and maybe micro level dry.

Brian Thomas Nowak: Ivers to kind of keep this stability versus drive deceleration.

Speaker Change: While we won't take the first one and I'll take the second one.

Speaker Change: Yes, so I think youre right in terms of the thinking was it the comparison in Q2 would be a little bit softer I think what we've seen so far just to repeat what I said previously is that yes. It was clear that there was a hard comp in January since then we've seen I would just say a general stability.

Speaker Change: We are not so far this year, we're seeing the same level of volatility that we saw in 'twenty three in terms of either movement of lead times or consumer I would say hesitancy to book during kind of macro dislocation.

Speaker Change: So general statement is that year to date, just the trends have been stable and Thats, what our Q2 reflects.

Speaker Change: The back half of the year I would say I don't know if I would characterize the back half of the year as harder comps I think if you recall actually some of the volatility that we and others saw in the back half of the year, there was a bit of a moment of dislocation.

Speaker Change: End of summer heading into October and in particular in the month of October related to the Commvault breaking out in <unk>.

Speaker Change: So I wouldn't necessarily characterize the back half of the year has been.

Speaker Change: A harder comp instead I think if you if you think through the growth initiatives that Brian talked about in terms of thinking about where our portfolio of investments lie I would say we are optimistic that aligns our core optimizations could have near term impact and as well as the international investments.

Speaker Change: Places, where we're really looking to drive in year growth above where we are today.

Speaker Change: And Brian I'll take the like for like questions. So specifically data, we're citing is global.

Speaker Change: Like for like basis. So when we're comparing is the average price of a global hotel room to a one bedroom listing on Airbnb in March and in March our prices were down 2% and hotel price were up 3%. So our prices were.

Speaker Change: Again, one bedroom globally on Airbnb in March was $114 down 2%.

Speaker Change: Sales were $148 up 3%. So that's what we're talking about one bedroom global.

Speaker Change: When our Edr's move obviously, the other thing to take into consideration mix shift oftentimes are edr's do go up because people increasingly more and more of our travel it's group travel 81% of our trips now have two or more guests and increasingly we're seeing people booking more space larger homes, just has traveled mixing towards larger groups.

Speaker Change: That's helpful. Thank you both and that was that was particularly the case in North America this quarter.

Speaker Change: On an absolute basis <unk> were up but if you exclude the impact of mix. They were they were.

Speaker Change: Flat.

Speaker Change: Okay, great. Thank you both.

Speaker Change: Okay.

Speaker Change: Your next question will come from the line of James Lee with Mizuho. Please go ahead.

James Lee: Great. Thanks for taking my question and just want to follow up the prior question on supply and demand world and in other segments of the gig economy services.

James Lee: Seem to benefit when supply exceeding demand. So if you think about ride sharing and food delivery, because they drive prices down and definitely increasing consumer demand.

Speaker Change: We you know.

Speaker Change: Think about it in the same path for home accommodation are you thinking expected, maybe a similar trend for your business as well thanks.

Speaker Change: I would say generally speaking when we see growth in supply is additive to demand. It means that when people are searching for a particular night in a particular city. If we have more that we can provide them. It is obviously net beneficial I think I would just repeat the prior comments that we don't.

Speaker Change: <unk> seen kind of in period equivalents by market in terms of the respective growth rates.

Speaker Change: And that I would say.

Speaker Change: Primary difference in terms of our business model relative to some of the others that you mentioned in that the frequency of the activity is typically lower.

Speaker Change: Lead time is also much longer.

Speaker Change: Great. Thank you.

Speaker Change: Your next question comes from the line of Stephen Ju with UBS. Please go ahead.

Stephen D. Ju: Okay. Thank you so much so Brian.

Stephen D. Ju: Would we be overreaching, if we were to think that.

Stephen D. Ju: <unk> is a leading indicator of what should be I guess, a revitalization of our re imagining of experiences so.

Stephen D. Ju: Maybe the overnight stay in the mid <unk>, let's say generates all the media and consumer attention, but maybe.

Speaker Change: This affords you the opportunity to expose the users you are getting.

Speaker Change: A more everyday experiences.

Speaker Change: Also secondarily.

Speaker Change: You've talked about this in the letter talks about this also the Olympics and Euro as Bob.

Speaker Change: And theres going to be travelers, who are probably not sports fans, who might want to be avoiding Paris on the host cities in Germany altogether. So.

Speaker Change: Is there anything you can share in terms of how additive.

Speaker Change: These two events may be.

Speaker Change: Alright, Stephen well that was that.

Speaker Change: That was.

Speaker Change: Absolutely not overreaching.

Stephen D. Ju: On Eikon, So let me, let me give you a sense.

Stephen D. Ju: Okay.

Speaker Change: <unk>.

Speaker Change: You can think of a company is going through a few phases, especially to start a company you have an idea you get product market fit that's phase one phase two as you try to go to the hydro growth we've done that phase III you become a real company go public you generate a return for shareholders and then the fourth frontier and very few times ever done. This as you reinvent yourself and you go from offering one.

Speaker Change: Thing to many things.

Speaker Change: A lot of big Tech kind of shift on this but one of the companies that I think is a really interesting way to look at is Nike.

Speaker Change: In the late <unk> and early eighties My recollection. It was 481, but my recollection is.

Speaker Change: Remember Nike was mostly a running shoe company and then the eighties, they became more popular with basketball and other things, but at the time people didn't really think of Nike as a serious basketball shoe and so they had to not only create a great product for for basketball, but they have to actually stretch the brand and open up for <unk>.

Speaker Change: Both mines, what Nike stands for and a lot of brands of how to do this I mean, Apple had to do this with the ipod and I think Airbnb one of the strengths of our brand also is something that we have to manage which is <unk> is synonymous with the category kind of like clean extra Xerox people say I'm going to get into Airbnb urban.

Speaker Change: Place literally the name of Airbnb has the named Bnb in it. So one of the challenges is that people open our app to expect to see states and so we want to do in addition to bringing back experiences you are totally right as we wanted to expand <unk> brand positioning to include more than just a place of <unk>.

Speaker Change: And one of the things Youll notice as we will launch icons. We said these are extraordinary experiences. We didn't say these are extraordinary stays we position them as experiences and so you can almost imagine.

Speaker Change: Icon with like where our car company, where we're starting with a formula one car and very very few people can experience a formula one car, but it captures the magic of captured the demand it really expands the brand and increases our permission to be able to go into experiences and then you kind of move down market and one of our goals is going to be to bring the magic of icons to ebb.

Speaker Change: Everyone. So I can't probably say too much more about experiences, but absolutely it's not a not a libre stretch whatsoever.

Speaker Change: Icons was primarily a brand positioning and our brand investment that obviously wasn't the business is only about 4000 tickets, but we're seeing some really encouraging signs in the last week, a big bump in traffic. It's a lot more top of mind a lot more people are opening our app and I just think we're being positioned as more aspirational and I think we're now starting to think of us for experiences. So.

Speaker Change: I think we've really laid that.

Speaker Change: Paved the way for next year.

Speaker Change: Lee do you want to take the Olympics in Europe, Yes, yes, certainly so if you look at our history I would say that special events have always been kind of a.

Lee: A good moment for Airbnb to Shine and then overall additive in terms of both our brand perception as well as supply growth I think what we've seen from prior events and I'm talking about.

Speaker Change: Pre Covid Olympics World Cup Super Bowl those type of events, what we see is that actually bring a ton of supply onto the platform and while not all of that supply will persist a good portion of it does and so it's a nice supply acquisition environment for US I would also say, it's really additive in terms of signaling to Citi.

Speaker Change: He is how helpful in additives Airbnb can be.

Speaker Change: To those cities to ramp up supply in a very organic and easy way without adding incremental hotel infrastructure that will not be necessarily.

Speaker Change: Needed long term and I think you'll see that in particular in Paris, right now, we're going to be hugely additive in terms of hosting.

Speaker Change: Travelers for the games.

Speaker Change: Whereas the existing infrastructure would not be able to manage such a large inflow.

Speaker Change: Thank you.

Speaker Change: Your next question will come from the line of Doug Anmuth with Jpmorgan. Please go ahead.

Douglas Till Anmuth: Hey, this is <unk>.

Douglas Till Anmuth: Thanks for taking the questions.

Douglas Till Anmuth: Walter you early.

Douglas Till Anmuth: Can you talk about how youre thinking about the investment levers.

Speaker Change: <unk> flexible ordinary shares or 35% plus.

Walter: For the full year can we expect to see these levers.

Walter: Most of those a year.

Walter: Yes.

Walter: You are entirely but a question about our guide for full year EBITDA margins of 35%, Let me if I could let me just talk a little bit yeah.

Walter: The investment and how youre thinking about some numbers here.

Speaker Change: Yeah. So let me just let me just step back and provide a little bit more color in terms of why the 75%.

Speaker Change: If you if you look at our performance since the IPO pre pre IPO, we had a negative 5% EBITDA margin and Lo and Behold three years. After the IPO, we delivered nearly 37% EBITDA margins last year I think we have repeatedly demonstrated the increased strength of this business model.

Walter: In terms of very strong profitability inclusive of GAAP net income profitability as well as free cash flow and at the same time, where we sit today, we see a huge opportunity in driving incremental growth and so as we kicked off the year last quarter and looked at our opportunity set.

Speaker Change: We've identified a handful of areas, where we'd like the flexibility to lean in and drive incremental growth.

Speaker Change: And what we're seeing today, so where would you see those investment leverage on the P&L. It's really two areas. So first not surprisingly is marketing.

Speaker Change: Marketing and we've been very disciplined over the last couple of years, we continue to have a much lower level of marketing intensity than really anyone else in travel and at the same time at the margin we have seen some incremental opportunities to lean in on channels, where we're seeing high rois in.

Speaker Change: In Q1, we saw nice very high Rois in performance marketing.

Speaker Change: To the extent that that continuously Lynn lean and modestly over the course of the year, Additionally, and probably more importantly.

Speaker Change: <unk> talked a little bit about our opportunity set in international markets and that's also an area where to the extent that our full funnel marketing investments are working leave them up to top off those investments and to therefore accelerate growth. So marketing is one line item you will potentially see some margin.

Speaker Change: Compression in order to drive growth.

Speaker Change: Area, Brian talked about prioritizing our resources and identified that in many cases, our product development team is our kind of scarce resource and I think when you hear us talk about our roadmap you can obviously I'm sorry that we have a very robust list of initiatives that we would like to tackle and.

Speaker Change: So theres an opportunity to at the margin add more personnel over the course of the year to allow us to accelerate that roadmap and you would see that in particular on the product development line item.

Speaker Change: So grand scheme of things no material pivot in terms of our overall financial discipline, but instead a bit of lean into those areas, where we believe we can accelerate growth.

Speaker Change: Thank you for the detailed response.

Speaker Change: Your next question will come from the line of Kevin Kopelman with TD Cowen. Please go ahead.

Kevin Campbell Kopelman: Great. Thanks, a lot I had a question on the May release you.

Kevin Campbell Kopelman: Added a couple of small new features on the to the user profiles I think on the photos in our travel stamps.

Kevin Campbell Kopelman: You see that as a first step towards.

Kevin Campbell Kopelman: Some of the profile enhancements and community features that you've talked about being interested in in the past and where does it where does kind of building out potentially new community features stand in your priority list. Thanks.

Speaker Change: Yeah, Hey, Kevin.

Speaker Change: We've spoken this call, mostly about icons, but I mean I am <unk>.

Speaker Change: Willie excited for the results that we've seen for group travel I'm not going to go through all the metrics.

Speaker Change: The metrics have been all really really positive figure travel features and in particular one of the things we've seen is.

Speaker Change: When people book, an Airbnb the average number of gap is too so that means that typically for every booking there is another there is another guest but typically the other guests doesn't.

Speaker Change: Hasnt connected their account to Airbnb. So if you travel with a partner or a friend maybe if you book the other person doesn't actually have an account where they havent connected their account so as we've and it's strategic for us to get more accounts that would make sense right, especially as you want to sell more things beyond home, we want to have a point of sale for every single person that trip.

Speaker Change: Not just the point of sale for the Booker. So this is really really critical for us and what we've seen is a major jump.

Speaker Change: And the number of co travelers that are now, creating accounting airbnb in not only trading accounts for filling out their their profile and so.

Speaker Change: To answer your question, Yes. This is the beginning of something much bigger.

Speaker Change: Zoom out.

Speaker Change: When we started airbnb.

Speaker Change: There are already aware of vacation rentals, but they were mostly young classified sites like craigslist or they were like paid subscription services like <unk> and one of the innovations we brought as we added profiles payments two sided reviews and messaging and those capabilities unlocked really this whole new <unk>.

Speaker Change: <unk>. This was we may call this system of trust.

Speaker Change: So what we're now doing is we're going to be investing a lot more in increasing our profile and our profile capabilities, both our account structure cleaning it up our identity verification.

Speaker Change: Making getting more people to complete more robust profiles, increasing their preferences. So we have more information about people and this is so strategic because as trust goes up.

Speaker Change: You can unlock more things for people and as we know more about you. We can match you better so I think in the future.

Speaker Change: Right now if you think of like the air can be solar system. The home is like the Sun at the center of the solar system I think in the future. The profile will be at the center of the solar system of Airbnb and the home will be one of many categories orbiting the profile.

Speaker Change: Great. Thanks, so much.

Speaker Change: Your next.

Speaker Change: <unk> comes from the line of Nick Jones with citizens JMP. Please go ahead.

Nicholas Freeman Jones: Great. Thanks for taking my questions I guess, maybe going back to supply and your effort to remove low quality supply.

Nicholas Freeman Jones: Can you speak to the percentage of the supply we have removed over time I think you said 101000.

Nicholas Freeman Jones: I guess, maybe take the removal and I guess, the learnings and come back and try to list and provide a kind of a higher quality a better experience.

Nicholas Freeman Jones: I guess as you continue to remove lower quality suppliers is becoming a tool to kind of.

Nicholas Freeman Jones: Nudge host into the behavior, you are looking for without actually having to remove them.

Nicholas Freeman Jones: Yeah.

Speaker Change: Hey, Nick why don't I take the first one.

Speaker Change: So.

Speaker Change: The first thing I'll say is.

Speaker Change: Yeah.

Nicholas Freeman Jones: Global occupancy on Airbnb is so much lower than hotel, so even though you type in a certain date in a location when does the popular day location occupancy can rise at a global level.

Nicholas Freeman Jones: We are still like not even close to high occupancy and so one of the gains that we need to do is we want to point demand to the best supply on Airbnb. So we don't.

Nicholas Freeman Jones: And so having removed all of the supply we haven't seen a fundamental shift.

Nicholas Freeman Jones: Impact on global bookings, because a lot of them either weren't getting as many bookings in the first place or they are eating up page views. They were lower converting listings or people are booking them. They were really expensive because they were leading to customer service contacts which are expensive.

Nicholas Freeman Jones: And if you went through all that the booking rate for them with much lower now as far as to answer your question about like how many of them come back I don't have the stats on the top of my head but.

Nicholas Freeman Jones: I think that like this quality control program one of the things we've noticed is that a.

Speaker Change: A lot of hosts are very coachable and renewable.

Speaker Change: Coachable and they can learn so I think one of the problems in this category is historically these marketplaces have been so hands off that people don't know what it takes to be successful and as you give them more like metrics as you give them more incentives to be good and as you create more boundaries about what's not acceptable airbnb.

Speaker Change: It actually does change behavior and people do come back so we're seeing that for sure and we're seeing that the good people rewarded and they tend to expand their business. So I don't have the exact numbers of people to come back, but absolutely. We do think people will come back.

Speaker Change: And if there is.

Speaker Change: Remediated some of their issues and some of what we do to as will will give warnings to people. So we don't always have to remove people. We can give warnings first and warnings are like very very effective we're just giving them a heads up and that actually has a way of increasing the quality of our platform. The last thing I'll just say on this as well.

Speaker Change: What what I think makes army different than our competitors, we have a much more hands on approach to quality than our competitors, but we are getting more and more hands on every single year as we want to get bigger and we want to capture more of the hotel travel market. Our quality has to go up and that means.

Speaker Change: That we need to just continue to raise the bar for quality. So we have a multiyear road map, where we're going to continue to do so and continue to invest in post education.

Speaker Change: Thanks for all the color Brian.

Novel Kang: Your next question will come from the line of novel Kang with B Riley Securities. Please go ahead.

Speaker Change: Yeah.

Novel Kang: Yeah, Hi, Thanks, a lot maybe a clarification from earlier I think I heard you say you saw really good rois on the performance marketing channels, just wanted to understand better where that came from and maybe.

Novel Kang: On a related topic was there any effect from the rollout of the DMA in Europe in March.

Novel Kang: Or maybe changes to Google search.

Speaker Change: In late March and early April and then I have follow up.

Speaker Change: Yes. So in terms of first the high Rois that we are seeing on marketing I would say.

Speaker Change: We over the last year has just been frankly very encouraged with the rois that we've been able to deliver from that channel.

Speaker Change: In particular like what has been driving that well, we think continually testing improving our performance marketing execution, we have.

Speaker Change: <unk> expanded the target audience is we've expanded our keyword coverage, we've made general improvements to the landing pages and all of that has been I would say quite successful in terms of allowing us to spend marginally more and maintain really great efficiencies. So really good channel for us even though it is obviously a minority of our overall.

Speaker Change: Marketing spend or strategy.

Speaker Change: In terms of your second question.

Speaker Change: Impact from the DMA rollout I would say, we haven't seen any meaningful impact.

Speaker Change: Primarily that is because the majority.

Speaker Change: 90% of our traffic is coming to us.

Speaker Change: Through direct or unpaid traffic and so.

Speaker Change: We have not seen any noticeable impact there yet.

Speaker Change: Alright, Okay, and then and then yes no it does.

Speaker Change: Maybe just on the changes to the extenuating circumstances policy wondering.

Speaker Change: I kind of understand better what kind of led to that change then.

Speaker Change: What kind of impact can we can expect from that we're trying to look at it.

Speaker Change: I didn't hear that question sorry.

Speaker Change: Sorry, the changes to the extra netting circumstances policy I think it was.

Speaker Change: Recently to kind of.

Speaker Change: The bar cancellations.

Speaker Change: Extenuating circumstance policy it Brian you have any comments on that I would say.

Brian Thomas Nowak: We just tried to clarify overtime and make that more equitable.

Brian Thomas Nowak: For our guests and hosts but no meaningful impact to the business.

Brian Thomas Nowak: Yes, I agree.

Brian Thomas Nowak: Okay.

Brian Thomas Nowak: Your next question will come from the line of Conor Cunningham with Melius Research. Please go ahead.

Conor T. Cunningham: Hi, everyone. Thank you just on the Underpenetrated in international markets.

Conor T. Cunningham: As you develop those I'm just curious if they're producing.

Conor T. Cunningham: What you'd expect in terms of key Kpis Trump.

Conor T. Cunningham: Take rate ADR profit, so just trying to understand how the mix changes are going to impact. The overall company and then just one on the <unk> re acceleration.

Conor T. Cunningham: I would assume that the book the booking window is a little bit more extended this year given some of the events. Just curious on where you are booked into <unk> right now just trying to understand the confidence underpinned our role there. Thank you.

Speaker Change: Yes sure.

Speaker Change: So first question is around economics of our international expansion markets. So if you think about the various factors on our economics. So first there's virtually no change in terms of our underlying take rates by market.

Speaker Change: Not a factor I would say second.

Speaker Change: Depending on the market that we're targeting many of these markets will have lower ADR is than our averages.

Speaker Change: So over time to the extent that we were.

Conor T. Cunningham: Incrementally more successful and higher seeing higher penetration in places like Latin America, or Asia Pacific, We would anticipate that the global ADR would come down and yet all of those nights would would be accretive so it would be market expanding even if the nice we're coming in at a lower ADR and what we've been able to.

Conor T. Cunningham: Achieve overtime is very strong economics at the booking levels for a wide range of ADR. So it is not a concern for us to be expanding in markets, where the average ADR is lower it is again just accretive in terms of the top line and the volume of the business.

Conor T. Cunningham: Your second question is around lead times.

Conor T. Cunningham: I would say generally speaking as I said previously our lead times year to date has been.

Conor T. Cunningham: Pretty pretty flat on a year over year basis, we did not see a pull forward that maybe some others in the industry mentioned.

Conor T. Cunningham: Yet when we look forward in terms of the backlog for Q3.

Conor T. Cunningham: It's quite small it's quite strong.

Conor T. Cunningham: And is that backlog that gives us confidence around the comments, we made in the outlook that <unk>.

Conor T. Cunningham: Q3 revenue should accelerate above that.

Conor T. Cunningham: Q2 outlook.

Speaker Change: I appreciate it thank you.

Speaker Change: I will now turn the call back over to Brian <unk> for closing remarks.

Speaker Change: Okay.

Brian Thomas Nowak: Alright, well, thank you all for joining us today and.

Brian Thomas Nowak: I just wanted to say before I wrap up this was <unk> first earnings call as CFO and that transition has gone incredibly well heard Dave and I are really really focused on this next chapter of growth.

Brian Thomas Nowak: A recap revenue was $2 1 billion. This is 18% higher than a year ago net income and adjusted EBITDA were both Q1 records and our trailing 12 month free cash flow was $4 2 billion.

Brian Thomas Nowak: Representing a free cash flow margin of 41% now.

Brian Thomas Nowak: We've made a tremendous amount of progress over the past few years and with the launch of icons. We're now laying the foundation for our plans to expand beyond our core business. This is just the beginning.

Speaker Change: Thank you all and we'll see you next quarter.

Speaker Change: That concludes our call for today, we thank you all for joining and you may now disconnect.

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