Q4 2024 Expedia Group Inc Earnings Call
[music].
Okay.
Yes.
Speaker Change: Good day, everyone and welcome to the Expedia Group Q4, 2020 full financial results teleconference.
Alex: Name is Alex and I'll be the operator face cool.
Alex: If you wish to ask a question at the end of the presentation. Please press star followed by one on just kind of think he pad.
Alex: If you change your mind. Please press star followed by two to cancel your request.
Speaker Change: For opening remarks, I will turn the call over to SVP corporate development strategy and Investor Relations.
Alex: Please go ahead.
Good afternoon, and welcome to Expedia group's fourth quarter growing 24 earnings call I am pleased to be joined on today's call by our CEO are you onboarding and our incoming CFO Scott Schenkel.
Alex: As a reminder, our commentary David include references to certain non-GAAP measures reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our earnings release.
Alex: Unless otherwise stated all growth rates are on a year over year basis, and any reference to expenses exclude stock based compensation.
Alex: We will also be making forward looking statements during the call, which are predictions projections or other statements about future events. These statements are based on current expectations and assumptions, which are subject to risks and uncertainties that are difficult to predict.
Alex: Actual results could materially differ due to factors discussed during this call and in our most recent forms 10-K, 10-Q and other filings with the SEC.
Alex: Except as required by law, we do not undertake any responsibility to update these forward looking statements.
Ed: <unk> SEC filings and a replay of today's call can be found on our Investor Relations website at IR Dot Expedia group Dot com and with that let me turn the call over to Ed.
Ed: Thanks Akshay.
Ed: And thank you all for joining us today.
Ed: I wanted to start by welcoming Scott Schenkel as our new CFO.
Ed: It's great to have him on board and you'll hear from him shortly.
Ed: Our fourth quarter results exceeded our expectations with room nights gross bookings and revenue all growing double digits.
This top line strength reflects our continued strong execution, along with better than expected travel demand.
Ed: Our disciplined cost management and top line outperformance resulted in strong EBITDA growth with margin expansion.
Ed: Bookings for the consumer business accelerated for the third consecutive quarter to 9% up five points sequentially.
Ed: Each of our core brands brand Expedia hotels, dot com and <unk> saw bookings growth.
Ed: Our <unk> business had a stellar quarter with bookings growth, increasing five points sequentially to 24%.
Ed: And our advertising business posted yet another strong quarter with 25% revenue growth.
Ed: Travel demand remained healthy in Q4, despite price increases in hotels vacation rentals and air.
Ed: Like last quarter International demand was stronger than the U S with booked room nights growing high single digits in the U S.
Double digits in Europe, and high teens, and the rest of the world.
Ed: Our <unk> business continues to benefit from this strong international demand, especially in APAC.
Ed: And in our consumer business, our global expansion efforts continue to show solid progress with bookings growth outside the U S accelerating four points sequentially.
Ed: Within our consumer business brand Expedia remains strong with room nights growing mid teens.
Ed: Air on Expedia, notably improved driven by higher ticket prices continued packaged product improvements and new merchandising capabilities.
Ed: For hotels Dot com bookings returned to slight growth driven by momentum in international markets.
Ed: <unk> bookings growth accelerated sequentially as well with improved traffic and conversion.
Ed: Global active membership in our loyalty program grew 7% in Q4, and our 12 month member repeat rate was also up over 300 basis points year over year.
Ed: Across our three core brands nearly 50% of room nights came from silver gold or platinum members.
Ed: These higher tier members receive additional benefits such as member discounts, which are funded by our supply partners and helped to drive loyalty to our brands.
Ed: Our strong fourth quarter results contributed to a solid full year 2024.
Speaker Change: When I stepped in as CEO last year, we set an ambition to bring verbal and hotels dot com back to growth, while extending our strengths in brand Expedia, PDP and advertising and being disciplined in our cost.
Speaker Change: While we have more work ahead I'm proud of how our teams delivered against this call to action and built momentum over the course of the year.
Speaker Change: Bookings growth in our consumer business accelerated every quarter in 2024 from negative 3% in Q1 to 9% in Q4.
Speaker Change: <unk> bookings grew 21% for the full year.
Speaker Change: We've grown bookings from existing partners through strong account management, great inventory and new product features and had our best year ever and production from new partners.
Speaker Change: Overall, <unk> accounted for 27% of our bookings last year and we've cemented our leadership here.
Speaker Change: Our advertising business.
Speaker Change: Sorry, our advertising revenue grew 32% in 2024 and drove 5% of our overall revenue.
Speaker Change: We onboard more advertisers to our platform launched new AD types like video and introduced new tools for partners to manage their campaigns.
Speaker Change: All of which are resonating strongly with our advertisers.
Speaker Change: As a reminder, advertising is a high margin high growth business, and we see a lot more opportunity to innovate.
Speaker Change: Supply is at the heart of our business and we made great strides last year in improving our supply through technology investments stronger partner relationships and everyday efforts from our commercial teams.
Speaker Change: We're sourcing more traveler benefits, whether through member deals or package discounts.
Speaker Change: We have released new functionality around merchandising and have improved the quality of our vacation rental supply.
Speaker Change: All of these are great for travelers, while delivering valuable and targeted demand to our supply partners.
Speaker Change: As we move into 2025, we have three overarching priorities building on our progress from 2024.
Speaker Change: First deliver more value for travelers.
Speaker Change: Second invest where we see the greatest opportunity to drive growth in each part of our business.
Speaker Change: And third continue driving operating efficiencies and expanding our margins.
Speaker Change: I'll share more color on each and then talk about how AI will help us across all three.
Speaker Change: Let's start with our first priority is delivering more value for travelers.
Already today, we create effortless personalized and rewarding experiences for customers.
Speaker Change: We do this through our supply with deals travelers can only get through us and bundles and savings that we can uniquely create.
Speaker Change: We also do it through our industry, leading customer service and innovative products and features that travelers Leland.
Speaker Change: And in 2025, we're going to do even more.
Speaker Change: And supply more member rates beyond hotels and more targeted offers.
In servicing more self service options, both in the product flows and in the virtual agent experience.
Speaker Change: And of course in product.
Speaker Change: All powered by deep insights and data that enable personalized experiences the travelers trust.
Speaker Change: Moving next to our second priority will invest where we see the greatest opportunity to drive growth in each part of our business.
Speaker Change: In our consumer business. This means focusing on our three biggest brands, having clear sharp value propositions for each of them.
Speaker Change: For Expedia for example, that's building on our strength as a one stop shop and focusing on differentiators like packages, while scaling newer products like vacation rentals.
Speaker Change: Our consumer business is still heavily weighted to the U S and while we made progress in 2024 looking ahead, we'll continue to push internationally in a targeted way.
Speaker Change: In our loyalty program and marketing will be even more targeted in our spending for example, looking deeply at where we see the biggest impact from our loyalty program.
Speaker Change: And in <unk>, it's about sourcing unique supply for our <unk> partners testing, new products and signing new deals and deepening our commercial partnerships.
Speaker Change: And finally, our third priority is to continue driving operational efficiencies and expanding our margins.
Speaker Change: We were disciplined in our cost management in 2024 and that allowed us to expand profit margins, while reinvesting in strategic areas.
Speaker Change: We believe we still have room to deliver further efficiencies across our variable cost and fixed cost base to expand our margins even further.
Speaker Change: AI is an accelerator for all three of these priorities and we've only scratched the surface.
Speaker Change: As we look ahead, we're exploring the many ways AI will unlock even more value in our products.
Speaker Change: Already seeing evidence of how AI is driving better experiences across the discovery shopping and postponing journey, which in turn are driving loyalty and growth.
Speaker Change: Going forward, we'll continue to test and release AI generated features to further personalize our traveler experience.
Speaker Change: AI also opens new possibilities to drive traffic to our brands as consumers increasingly search and new Gen AI native experiences and we're ensuring that we meet them where they are.
Speaker Change: And for our <unk> business.
Speaker Change: AI trial, the AI native travel startups that will inevitably emerge present, new partnership opportunities.
Speaker Change: Finally, we see tremendous opportunity to use AI to allow our teams to move faster and be more productive.
Speaker Change: It's not just about cost reduction, what's even more exciting is how it will enable our teams to spend more time, where they can have the biggest impact.
Speaker Change: We're excited about the potential and are seeing early results across customer support technology marketing and our commercial teams.
Across all parts of how we operate our business.
Speaker Change: So in closing, we're pleased with our fourth quarter performance and the momentum we've built over 2024, and we believe that in 2025 and beyond we have a substantial opportunity to drive even greater value for our travelers partners and shareholders.
Scott Schenkel: With that over to you Scott.
Scott Schenkel: Thank you Ryan and good afternoon, everyone.
Scott Schenkel: I am excited to join Expedia group and I look forward to partnering with you and the team to help deliver our priorities.
Scott Schenkel: Let's get started we were up 2024 with a strong fourth quarter, both financially and across many of the operating metrics room nights gross bookings and revenue all grew double digits with EBITDA margins expanding nicely.
Scott Schenkel: Total gross bookings was $24 4 billion grew 13% with a five point sequential acceleration.
Scott Schenkel: Both <unk> and <unk>.
Scott Schenkel: With a better than expected demand environment and strong operational execution.
Scott Schenkel: We had a particularly strong post thanksgiving promotional window.
Scott Schenkel: Bookings during this period, where our highest ever.
Scott Schenkel: Lodging gross bookings grew 12%, which includes our hotel business growing 14%.
Scott Schenkel: And continued acceleration in <unk>.
Scott Schenkel: Outside of our lodging business. We also saw notable strength in our air business driven by higher air prices growth in multi item packages and our new merchandising capabilities.
Scott Schenkel: Revenue of $3 2 billion grew 10% led by our <unk> business, which grew 21%.
Scott Schenkel: Revenue growth accelerated seven points from the third quarter, primarily driven by verbose bookings momentum throughout the year translating into stays and further improvement in hotels Dot com.
Scott Schenkel: Gross margin was nearly 90% for the quarter up 125 basis points.
Scott Schenkel: We are pleased to see our ongoing initiatives continued to deliver transactional efficiencies, particularly in customer service.
Scott Schenkel: Direct sales and marketing expense in the fourth quarter was $1 5 billion.
Scott Schenkel: Up 13%.
Scott Schenkel: Leading to flat leverage as a percent of gross bookings.
Scott Schenkel: This was over 20 basis points of sequential improvement driven by continued efficiencies that brand Expedia.
Scott Schenkel: As I noted earlier brand Expedia did benefit from a merchandising actions for our air business as they resulted in bookings without any incremental marketing expenses.
Scott Schenkel: Our overhead expenses were $643 million.
Scott Schenkel: A decrease of 1%, resulting in nearly 250 basis points of leverage.
Scott Schenkel: This was primarily driven by lower people costs in products and technology from our actions in 2024 as well as overall strong expense control.
Scott Schenkel: We remain committed to driving efficiencies across our P&L and we're pleased to see another quarter of strong overhead leverage.
Scott Schenkel: We delivered fourth quarter EBITDA of $643 million up 21% with an EBITDA margin of 22% an expansion of 175 basis points.
Scott Schenkel: This was better than expected due to both the higher revenue growth and effective expense management.
Scott Schenkel: We delivered $338 million of EBIT with a margin of 10, 6% up 280 basis points.
Scott Schenkel: This was 105 105 basis points greater than EBITA margin expansion, driven by lower stock based comp and ongoing depreciation leverage.
Scott Schenkel: Turning to the full year results, we posted gross bookings of 111 billion up 7% and revenue of nearly $14 billion also up 7% underpinned by a notable recovery throughout the year and our <unk> business and continued strength in <unk> and our advertising business.
Scott Schenkel: While we decided to invest in marketing to accelerate our <unk> business. We feel that was net beneficial to the business and we paid for this probably being financially disciplined and driving gross margin improvement of 170 basis points and overhead of approximately 140 basis points as a result.
Scott Schenkel: EBITDA margin for the year was 21, 4% an expansion of approximately 60 basis points.
Scott Schenkel: This strong earnings growth enabled us to generate another year of robust free cash flow of $2 3 billion up 26% driven primarily by higher EBITDA growth in deferred merchant bookings and lower capital expenditures.
Scott Schenkel: Moving to our balance sheet with strong cash flow, we ended the quarter with $4 5 billion of unrestricted cash and short term investments.
Scott Schenkel: In late January we notified the holders of our May 25 debt tranche that we will pay those notes in February.
Scott Schenkel: We continue to actively manage our balance sheet with the goal of maintaining debt levels consistent with our current investment grade rating.
Scott Schenkel: As a result and subject to market conditions, we intend to refinance and maintain our target leverage ratio of two times.
Scott Schenkel: As part of our disciplined capital allocation strategy, we repurchased $1 6 billion or $12 1 million shares in 2024.
Scott Schenkel: This combined with the shares we have repurchased since we reinstated the program a little over two years ago as a resulted in over $4 billion or 36 million shares repurchase.
Scott Schenkel: So in summary, a solid year with a strong Q4 finish.
Scott Schenkel: Moving to our first quarter guidance.
Scott Schenkel: We expect our first quarter gross bookings growth to be in the 4% to 6% range and revenue growth to be 3% to 5%.
Scott Schenkel: This reflects approximately two points of foreign exchange headwind at current rates.
Scott Schenkel: And the impact from lapping leap year and in revenue the Easter shift to April.
Scott Schenkel: In Q1, we expect EBITDA margins to be flat to slightly better year over year.
Scott Schenkel: As a reminder, the first quarter is our lowest EBITDA quarter, causing margins to be highly sensitive.
Scott Schenkel: Moving to the full year guide, we expect our 2025 gross bookings and revenue growth in the 4% to 6% range, which is roughly in line with 2024 factoring in the two points of negative FX impact.
Scott Schenkel: On the bottom line, we will continue to optimize our cost structure to deliver efficiencies.
Scott Schenkel: And as a result, we expect to deliver another record year of EBITDA with margin expansion of 50 basis points year over year.
Scott Schenkel: With strong performance on EBITDA and cash flow, we will continue to buy back our stock Opportunistically with approximately $3 2 billion remaining on our share repurchase authorization.
Scott Schenkel: Additionally, today, we announced that we are reinstating our quarterly dividend starting in March of 2025, with a dividend of <unk> 40 per share, which is approximately a 1% annual dividend yield.
So in closing we remain focused on delivering long term profitable growth, while being disciplined capital allocators.
I am confident with our strategies for growth and strong ongoing execution, we will continue to deliver shareholder returns in 2025 and beyond.
Scott Schenkel: Let me now open the call for questions.
Scott Schenkel: Thank you as a reminder, if you'd like to ask a question. Please press star followed by one on the telephone keypad.
Scott Schenkel: I'd like to remove your question you May press star followed by two.
Speaker Change: Our first question for today comes from Mark Mahaney of Evercore ISI. Your line is now open. Please go ahead.
Mark Mahaney: Thanks, I just wanted to ask about.
Speaker Change: Her bow and hotels dot com the recovery that you've seen an improvement recovery for each common.
Mark Mahaney: Ongoing improvement for.
Mark Mahaney: Just talk about the sustainability of those into next year, what are the where the initiatives that you think.
Mark Mahaney: He started turning those businesses around sort of help us to have confidence that that's going to continue into 'twenty five. Thank you very much.
Mark Mahaney: Okay. Thanks, Mark let me start with <unk>.
Mark Mahaney: Yes.
Speaker Change: We did a lot of work in 2024 on product supply and marketing and that all three of those.
Speaker Change: The acceleration through the year and I do want to take a minute to thank the teams for that because it was it was a big task to do it.
Speaker Change: We are cognizant of the fact, though that Volvo barbell with hotels Dot com was meaningfully disrupted during the re platforming and we lost travelers that were still winning back.
Speaker Change: On product, we put backs and features that we had lost verbal also benefited from some of the platform capabilities like dateless search or property comparison, but.
Speaker Change: But we recognize that we still have more work to do whether it's on products or supply in particular, and we've got some exciting plans coming in 2025 around both of those so I would just say, especially on product and supply. We know there's more work ahead, we're going to continue leaning in where we see the best returns and pulling back.
Speaker Change: The returns aren't as strong.
Speaker Change: When it comes to hotels Dot Com that one was also that brand was also pretty meaningfully impacted with not only the tech migration, but also the change in the loyalty program and pulling back and international.
Speaker Change: As I said, we have come back to modest growth at the end of the year.
Speaker Change: And the team has some big plans around really reinvigorating that brand that we'll see come to life in 2025.
Speaker Change: I would say all of that we've got conviction in these two brands. We know there's still a bunch more work to do but we feel good about where we are right now.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thanks.
Speaker Change: Thank you. Our next question comes from Justin Post of Bank of America.
Speaker Change: Your line is now open. Please go ahead.
Speaker Change: Great. Thank you.
Speaker Change: Like Q1 guidance has some detail and bookings could you talk about I know theres been some weather issues may be in.
Speaker Change: Other issues any any headwinds early Q1.
Speaker Change: That youre thinking about and then just longer term on margins 50 bps.
Speaker Change: A nice improvement year over year, but but where you are versus peers. It looks like theres a lot of room, there alright, how you're thinking about longer term and what you can do with margins versus your peers. Thank you.
Speaker Change: Let me start with the Q1 guide first off.
Speaker Change: As I said in my script, the bookings growth is four 4% to 6% factoring in two points of FX headwind.
Speaker Change: About a point lapping leap year.
Speaker Change: If you look at that Thats, roughly 7% to 9% excluding those two realities.
Speaker Change: Yes.
Speaker Change: Nothing appears to be structurally different in the travel environment to your question. We have seen some softening relative to Q4, which was strong as we pointed out in our latest guide reflects that.
Speaker Change: Might have strong.
Speaker Change: With strong holiday promotions in December we also believe there may be some there might've been some pull ins of some of the January bookings. So we think all of that kind of brings us to the 4% to 6% and we feel pretty good about that pivot.
Speaker Change: Pivot to revenue growth just to kind of close out the point Im sure. Our guide of 3% to 5% reflects some added pressure from lapping last year in particular, the Easter timing shift. So you take 3% to 5% plus two points of foreign exchange pressure point from leap year, and roughly a point from Easter.
Speaker Change: We're at a kind of very equivalent to last year.
Speaker Change: The way, we think about it maybe I'll take a shot at margins.
Speaker Change: I think a half a point of margin in 2024.
Speaker Change: And a half a point of margin in 'twenty five a nice one point is a good start and I think we're doing it in a way that balances growth.
Speaker Change: Sure that we handle what we need to with marketing and make sure that we would keep the traffic and the demand up and we balanced the forward looking needs for overhead and make sure we reduce that and I think <unk> seen both in 2024 and 25 overhead come down.
Speaker Change: And realized some nice leverage in the cost structure right I don't know if you have anything else.
Speaker Change: Okay.
Speaker Change: Thanks, Justin.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Our next question comes from Deepak Master panel of Cantor Fitzgerald.
Speaker Change: Your line is now open. Please go ahead.
Deepak Master: Great. Thanks for taking the questions just.
Speaker Change: Just wanted to dig a little bit deeper into the <unk> side, what's driving the strength in APAC can you also talk about kind of like the roadmap of new partnerships and what would be the primary growth driver as we think about 2025 for the <unk> business and then Scott great to hear from you again.
Speaker Change: Maybe I'll just ask you to expand a little bit on the margin comment last year, you guys had cost saving efforts that helped the margin expansion this year.
Speaker Change: You should still see fixed cost leverage, but what is the high level strategy beyond <unk>.
Speaker Change: Achieving fixed cost leverage maybe also in terms of how youre thinking about marketing investments and so on any color you can add about different line items that should help with the leverage would be super helpful. Thanks again.
Speaker Change: Yes, thanks feedback on <unk>.
Speaker Change: Couple of things that are driving the strength in APAC is one the.
Speaker Change: The partnerships that we have there we're adding new partnerships, we have some deep long standing partnerships.
Speaker Change: And the fact that the markets that are growing well to the partners that we're working with are growing in line or faster than the market and we're able to win share with them typically what we do is you'll sign a partner.
Speaker Change: You'll have you'll get some of their business and then over time as we deepen our relationship as we put in place that is new.
Speaker Change: New strategies with them, we're able to win share so thats really whats going on in APAC and then in terms of <unk> for this year as I said, it's really a formula.
Speaker Change: What can we do with our existing partners as they are growing what new inventory can we put in with them where can we have our inventory surface more it's also signing new partners and testing, we're going to be testing some new products in market.
Speaker Change: I also want to make sure everyone understands the importance of supply.
Speaker Change: The quality of our supply is so critical and growing that BW business.
Speaker Change: We've over the last couple of years done a lot of work in being able to get some supply that is particularly relevant to some of our <unk> partners.
Speaker Change: Just on the margins, maybe I can pick it up for.
Scott Schenkel: For Scott as well.
Speaker Change: We're not going to break out the different pieces that clearly.
Speaker Change: We see opportunities in a number of places we just want to make sure that we maintain the ability to invest in the areas that we see good long term growth. During 2024, we talked a number of times about how we were leaning into international markets. We were leaning into verbal maybe in ways, where it wasn't as good as short term.
Speaker Change: Return as we might get elsewhere.
Speaker Change: We believe we need to have that ability to balance sort of investment for the long term and also remained committed and disciplined in our margin expansion.
Speaker Change: Great. Thank you very much.
Speaker Change: Thanks Keith.
Speaker Change: Thank you. Our next question comes from <unk> Khan of be Ronnie Securities. Your line is now open. Please go ahead.
Speaker Change: Okay. Thank you very much so.
Speaker Change: You guys added.
Speaker Change: Some inventory too.
Speaker Change: Verbal I think it was a apartment type of inventory.
Speaker Change: Roughly a million properties wondering if you have any any color to provide in terms of how that.
Speaker Change: That inventory performing relative to expectations and as you think about.
Speaker Change: Five is that the type of inventory youre there.
Speaker Change: We've tried to kind of add to wellbore.
Speaker Change: It would be more of call homes and the second question I have is really sound.
Speaker Change: The advertising revenue so it was 25% growth.
Speaker Change: Strong and wondering how sustainable that is into into 25. Thank you.
Speaker Change: Okay. Thanks for the question.
Speaker Change: On the <unk> inventory as we said we added 1 million properties. These were a lot in urban areas Theyre always at properties that aren't shared spaces that have new host.
Speaker Change: There were a number of apartments and im not going to say specifically, how they are doing other than to say that did contribute to verbose recovery.
Speaker Change: As we look to supply in 'twenty five it's not only about adding new supply, but also how do we make sure that the supply that we have had.
Speaker Change: Has flexibility has great cancel policies has maybe longer different promotions and the like so when we think quality of supply it's not only in the number of properties, but its also in rate types and.
Speaker Change: Flexibility.
Speaker Change: In terms of AD revenue you are right that the last multiple quarters, we've been growing that very quickly.
Speaker Change: We still see a lot of road ahead, whether it's getting more advertisers into our products into our auctions, because we work with tens of thousands of hotels and other partners around the world.
Speaker Change: Whether it's the innovation and the products themselves. So that the advertisers are getting better returns and were able to monetize.
Speaker Change: <unk> new AD types in our brands and so the team has quite a roadmap ahead.
Speaker Change: And they're very focused on driving more value to our partners and also doing it in a way that's positive for our travelers.
Speaker Change: Thank you Ian.
Speaker Change: Thanks.
Speaker Change: Thank you. Our next question comes from Trevor Young of Barclays. Your line is now open. Please go ahead.
Speaker Change: Great. Thanks.
Speaker Change: Prepared remarks, I think you mentioned potentially partner again AI can you expand on that and do you view using some of those applications as a potential customer acquisition channel for Expedia, whether you'd be a supply partner for them and then Relatedly does that shape. How you think about some of the investments in bromine.
Speaker Change: AI capabilities in House, and then second question with regard getting are potentially getting acquired any thoughts on how that changes your outlook for Latam and your partnership there.
Yes.
Speaker Change: Thank you for the question, Yes, I would say in AI I would really think about it.
Speaker Change: It's in three buckets. The first bucket is how are we using AI to make our products better whether it's for travelers of our partners.
Speaker Change: We've been doing it for a couple of years.
Speaker Change: There's obviously a lot more to go but we need to make sure that when travelers come into our brand while a they want to start there with our search and Theyre getting a delightful experience that makes them want to come back same thing with our partners, whether it's your onboarding or things we're doing in advertising how do we use all of the great developments in AI in our <unk>.
Speaker Change: Alex.
Speaker Change: The second is looking at changing traveler behaviors.
Speaker Change: Remarks.
Speaker Change: Travelers are going to start to search in different ways and so we need to make sure that our brands are showing up in those new places where people are using gen AI native search.
Speaker Change: And Fortunately, we've got a very tech sophisticated marketing team that is making sure that we do show up there.
And then there's the question of if there are these native AI travel startups could we go partner with them and can we go power them and that's why to me if I think about all three of those we see opportunities across the board and we want to make sure that we're really on the front foot and of course in all of that I'm not even talking about how are we using AI for our internal users.
Speaker Change: Yes.
Speaker Change: In terms of Latin America, and <unk> I would say it doesn't change our perspective on Latam desktop has a great partner for US we have our own brands and Latam and we have a number of partnerships there as well.
Speaker Change: Great. Thank you.
Speaker Change: Thanks Todd.
Speaker Change: Thank you.
Speaker Change: Next question comes from Conor Cunningham of Melius Research. Your line is now open. Please go ahead.
Speaker Change: Hi, everyone. Thank you.
Speaker Change: I think you saw some nice leverage on the marketing side could you just talk about the tactical changes that youre, making there and just.
Speaker Change: That's eating and just like underlying growth within the international markets and whatnot and then I think you mentioned in the prepared remarks, just merchandising and better cross selling of products can you talk about that a little bit more.
Speaker Change: Underlying bank whats your expectation for that in the 25 in general Thank you.
Speaker Change: Yeah. Thanks for the question.
Speaker Change: On marketing, we've talked over the last I think year and a half about how we've been looking at marketing.
Speaker Change: And loyalty and our sort of promotional spend we look at all three of those together to say where are we getting the best returns and which of those works, the best and which place and the teams are getting more sophisticated on understanding that understanding those returns both by brand and by Geo.
Speaker Change: So I would say, it's not really a tactical change I mean, it's just it's continuing down that path of better understanding returns and being able to.
Speaker Change: <unk> to.
Speaker Change: Act decisively when we see things and you can expect more of that in the year to come.
Speaker Change: Some of the international growth also came from work we've done in packages have talked about sort of work on the packaged product also on promotions and some countries tend to be more package heavy countries than others. So that has helped us in the growth.
Speaker Change: We do see that when travelers by multiple items from us they're more likely to repeat.
Speaker Change: So we know that we give travelers a great deal when they buy a package from us or when they buy one thing and then add something else on so they are getting a good deal and we know that it drives repeat for us. So that I would say has been in the Expedia brands DNA.
Speaker Change: At the beginning and it's something we continue to lean into.
Connor: I appreciate it thank you thanks Connor.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Jed Kelly of Oppenheimer. Your line is now open. Please go ahead.
Speaker Change: Hey.
Jed Kelly: Great great. Thanks for taking my questions. Two if I may just looking at your full year guidance for 25, one would assume would imply some type of deceleration in your <unk> segment. So can you just give us an update how we should think about <unk> 25, and then I was a little surprised you're saying your margins are going to be flat in <unk>.
Jed Kelly: I figured you were Comping last year, where you pulled back on some peripheral advertising in <unk>. So can you just give us an update on how youre viewing your advertising around verbal. Thank you.
Jed Kelly: Sure why don't I take take that in any way in the.
Jed Kelly: First off like we talked about.
Jed Kelly: Acts as a headwind for the year as well. So if you index off the revenue growth I'll start there of 3% to 5%.
Jed Kelly: You got two points of headwind from from the <unk>.
Speaker Change: Foreign exchange.
Speaker Change: Got a little over for Q1, and you have a little bit of an Easter shift as well from.
Speaker Change: And the Comping of Easter in really getting pushed out to two the second quarter.
Speaker Change: So that pressures revenue as well so you're really looking at a range factoring in those three items of 79% roughly to spell it out.
Speaker Change: So yes, the deceleration, but some of that we're factoring in is really driven by some of the dynamics that we've talked about with regards to seeing what we see it in the first.
Speaker Change: A few weeks of January.
Speaker Change: So without rehashing that.
Speaker Change: We factored that into the guide.
Speaker Change: And I was just going to add on the herbal question. It is really in Q4 23 that we pulled back significantly and the advertising on <unk> because that was the time that we were going through the migration.
Speaker Change: So just.
Speaker Change: Yeah.
Speaker Change: Alright.
Speaker Change: And margin Wise, you are roughly flat.
Speaker Change: I think.
Speaker Change: It's leaving enough room for us to make sure that we can redeploy marketing as we talked about very much in line with our ion just said a minute ago as raws continue to get the leverage.
Speaker Change: Out of overhead and some of the other cost buckets, but leaving room for the for the investors as we see fit to drive growth.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from Lee Horowitz of Deutsche Bank. Your line is now open. Please go ahead.
Speaker Change: Great. Thanks, so much for taking the time.
Speaker Change: Meanwhile, margin I appreciate you guys wont break out the pieces of the margin guide in the past, we've obviously talked a lot about marketing leverage and can you maybe help us understand if you expect to get marketing leverage 25 is that a input to that 50 bps of margin or are there other sort of.
Speaker Change: Areas of fixed and variable cost efficiencies that can drive this kind of margin.
Speaker Change: I think to reflect roughly half a point, we're not going to have margin expansion for the year, we're not going to get into the different line items will explain it as we go through the year, but I. Appreciate the question and I understand why you are looking for that.
Speaker Change: Okay, No worries and then maybe just on <unk> any comments, obviously pointing towards a little bit of a slowdown in the <unk> relative to a strong <unk> any comments on <unk> quarter to date trends and maybe just like your outlook for where verbal can grow sort of longer term, particularly relative to a market may be growing low to mid single.
Speaker Change: So you think you guys can.
Speaker Change: The market for quite some time and what do you see as the key differentiators to do that.
Speaker Change: So we're not going to again sort of directional guidance on one of their brands, but what I can say is we believe that <unk> has a differentiated value proposition of being.
Speaker Change: A vacation rental pure play.
Speaker Change: There is no host and its whole homes again, we recognize that.
Speaker Change: It hasn't.
Speaker Change: <unk> had some of the investments or some of the investments whether it's in product supply and alike until last year.
Speaker Change: And we believe that there is a lot of growth that we can get from it at the same time.
Speaker Change: We're still testing what are the things that work the best whether it's around marketing spend and the loyalty program. We're learned we've learned a lot in the last year in particular regarding the loyalty program of what are the returns from various things. So I think you will find in the year to come.
Speaker Change: He will continue to be investing in the brand as I sat across marketing supply and product.
Speaker Change: And that will make decisions.
Speaker Change: Based on what we need to do in order to grow cortlandt, but completely have conviction.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Kevin Kopelman of TD Securities. Your line is now open. Please go ahead.
Speaker Change: Great. Thanks, a lot and Scott congrats on the start.
Speaker Change: Yes, just wanted to ask you about capital returns philosophy, if you can give us any more color on.
Speaker Change: First I guess, how youre thinking about share repurchases and your philosophy, there and then with the re institution of the dividend.
Speaker Change: How youre thinking about the size of that dividend over time, and where it falls so with your capital returns. Thanks.
Speaker Change: Yes, absolutely.
Speaker Change: Let me just start with the basics around capital allocation. So we talked about in the script about prepaying some of the debt and we plan to refinance that if market conditions are favorable. So we will remain committed to the target leverage ratio of two times.
Speaker Change: Buybacks specific to those we remain a catheter it remains a capital allocation priority for us in 'twenty four alone as I covered we bought back 12 million shares for $1 billion six.
Speaker Change: And while the pace of these buybacks can vary quarter to quarter.
Speaker Change: With over $3 billion remaining in our current repurchase authorization, we will continue to be opportunistic how we buy those shares back you can expect us to be in the market doing that.
Speaker Change: Specific to <unk>.
Speaker Change: Dividends, what I'd say is let's start with 40.
Speaker Change: And let's see how that how things progress from there obviously part of this is making sure that we are a dividend for income investors that want to be invested in our stock and have thresholds. So it's really important that we do that and it was important for us as a company as we think about having to have turned off the dividend during the.
Speaker Change: During COVID-19 that to <unk>.
Speaker Change: Bring it back is important for our shareholders and our overall capital allocation methodology and thought process.
Speaker Change: And then I think it's also important.
Speaker Change: We have room in our capital structure to invest in the business, including M&A, if the opportunities present themselves.
It's important to keep that flexibility, but I think with a really strong stock buyback with the with the.
Speaker Change: The allocation that we have a strong dividend coming out of the gate of 1%, we feel pretty good about where we're going to go and what we're doing.
Speaker Change: Okay. Thanks, that's really helpful and just maybe a follow up on your comment there with kind of.
Speaker Change: The core consumer brands doing better.
Speaker Change: Does that change the way that Expedia is thinking about.
Speaker Change: Larger acquisitions, and whether it would be a time to add another brand into the fold.
Speaker Change: Look I think look I'm coming in new year, but I think anytime a company at our scale and our our our technology base, we should be in the market and looking at M&A and I think they have been and will continue to be.
Speaker Change: I don't know if you have any others.
Speaker Change: Thanks, John said it we obviously we have a team that's looking at deals.
Speaker Change: Right now we continue to be focused on.
Speaker Change: Running the brands that we have growing the <unk> business, the advertising business and continuing to have strong returns.
Speaker Change: Thank you.
Speaker Change: Thank you.
Next question comes from Doug Anmuth from Jpmorgan. Your line is now open. Please go ahead.
Doug Anmuth: Great just to stay on.
Speaker Change: Doug Thanks for taking the questions I have two first one could you share your views on the overall travel demand in <unk> II.
Doug Anmuth: One five travel Susan.
There were any particular regions in <unk> or you might have been taking share and then the impact from the appreciation of the U S dollars.
Doug Anmuth: And then secondly, very curious if you have any updated thoughts on your loyalty strategy.
Doug Anmuth: Particularly in markets outside of the S&P Okay.
Doug Anmuth: Sorry can you repeat that I didnt hear the last bit.
Speaker Change: So we are curious about your if you have any updated thoughts on the loyalty strategy implemented 25, particularly in the markets.
Speaker Change: U S and the U K okay. Yeah. Thank you. So just in terms of the travel environment as we said the travel environment was very healthy in the fourth quarter and while we've seen some softening in January relative to Q4 as I said some of it we think is.
Speaker Change: Full forward from the strong Thanksgiving promotions.
Speaker Change: There is FX pressure there is some moderation in prices, but we don't think anything has structurally changed and that the environment is healthy in terms of regions, where we're taking share and I shared in my prepared remarks that our room night growth.
Speaker Change: With higher in international markets than in the U S and we believe that in a number of those markets we are taking share.
Speaker Change: In terms of the impact from the stronger dollar obviously as Scott Scott shared the impact of that on our guidance.
Speaker Change: But what it also means is that over time, a stronger dollar makes it more attractive for Americans travelling abroad, and whenever there are opportunities around that our teams are always looking at how can we help travelers understand when they are in good deals for them.
Speaker Change: In terms of our loyalty strategy in 'twenty five outside of the U S and U K.
Speaker Change: As you all May know, we paused the rollout of <unk> after the U K.
Speaker Change: And so what our teams are now working on is taking the learnings that we've had from <unk>, where we know that it's been a net positive for Expedia, it's been a drag on bookings for hotels dot com and for <unk>, It's driven new travelers from cross sell from people, who have earned on Expedia and hotels Dot com.
Speaker Change: Then redeeming on verbal, but we're still assessing the impact of the always on earn on Bravo. So we're going to take all of those learnings and then look by brand and by geography, what we need to do in loyalty and we'll share more on the year to come.
Speaker Change: Got it thank you.
Speaker Change: Thank you at this time <unk> no further questions, so I'll hand back to Eric.
Erin: Erin for any further remarks.
Speaker Change: Yes.
Speaker Change: Thank you all for joining us today and we appreciate the questions we.
Speaker Change: We closed the year with a strong fourth quarter and solid full year results looked.
Speaker Change: Looking ahead, we're focused on our three priorities are delivering more value for travelers investing where we see the greatest opportunities drive growth and expanding our margins.
Speaker Change: And I'd like to close by thanking our team for their work and dedication on behalf of travelers and partners all around the world. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you all for joining today's call you may now disconnect your lines.
Speaker Change: [music].