Expedia Group, Inc.

Hello and welcome to the Expedia Group Q2 2021 earnings call. My name's Emma and I'll be the operator for today's call. If you wish to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two to cancel your request. I'll now hand over to SVP and CFO Retail, Patrick Thompson. Please go ahead.

Good afternoon and welcome to Expedia Group's financial results conference call for the second I'm pleased to be joined on the call today by our CEO, Peter Kern, and our CFO, Eric Hart. The following discussion, including responses to your questions, reflects management's views as of today, August 5th, 2021 only. We do not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward-looking, typically preceded by words such as, we plan, we expect, we believe, We anticipate, we are optimistic or confident that, or similar statements. Please refer to today's earnings release and the company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on the company's investor relations website at ir.expediagroup.com. And I encourage you to periodically visit our IR website for other important content. Unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense, and technology and content expense exclude stock-based compensation. And all comparisons on this call will be against our results for the comparable period of 2019. And with that, let me turn the call over to Peter.

Thanks, Bob. Good afternoon, everybody, and thank you for joining us today for our Q2 earnings call. I'll be relatively brief, and then Eric will take over and we'll take some questions. I'll open with saying that, in general, Q2 was quite strong and a major improvement on Q1, and we were pleased with with the progress we made with particular strength in North America and the U.S. As I've said before, the market has been driven by a lot of COVID-related changes and patterns. Domestic travel has been stronger, VR stronger, whereas international travel, corporate travel, even big city travel has been relatively muted comparatively. The good news in that is that we find ourselves in a relatively stronger position in the U.S., our largest market and the largest travel market, but in places like APAC, where we have a largely international business, that obviously has not responded as quickly. So as we look across our performance, there's all those moving parts in the mix. And together, what that delivered in the second quarter was generally improvement in the April-May time period and another step up and significant step up in June, not unlike what we saw in the first quarter with a step up in March. July has been impacted somewhat by Delta and the Delta variant, and we've seen some backwards movement in July, but in general, still relatively stronger performance compared to earlier parts of COVID. As it pertains to travel patterns, I think it's important to keep in mind that obviously we don't know where Delta is going. Places like Australia have had shutdowns. whereas other parts of the world, including parts of Crimea, things are opening up somewhat more. But there's a lot of unknowns, including in the U.S., and we're starting to see some of that percolate through cancellation rates and more volatility in the numbers. I think it's also important to keep in mind that as we move into the fourth quarter, where traditional trends would have had leisure coming off and corporate coming up, et cetera, there remain a bunch of unknowns across the globe in terms of back to school, back to work, and how people will travel in this portion of our COVID times. That being said, as we focused on marketing, Q2 was obviously a time of relative strength, and we aggressively pushed into marketing. We saw the opportunity to get in front of the building momentum and travel. And as we talked about before, we have a long-term goal of building more brand recognition and pushing more into brand marketing, creating longer-term relationships with customers. Performance marketing, on the other hand, remained considerably volatile, especially as we've seen cancellation rates more recently growing slightly. So, we were relatively leaned in in Q2. We expect to be leaned in in Q3, but with a bias towards brand building for the long-term relationships with customers, and we do believe whenever COVID subsides in a way that gives people real comfort, there's so much pent-up demand that travel will outstrip anything we've really ever seen before around the globe. And as we move... I just want to emphasize that this is an area where we felt there was opportunity to be stronger. John Dieselman joined us in the middle of the quarter. John is a great talent coming to us from Apple. He is a terrific brand builder, and brand and performance marketing work together. We have to really define and build our brand, and I've talked extensively in the past about rationalizing the brands, making them work together, and allocating capital appropriately, and we have great confidence and what John will bring and has already brought to the organization. Likewise, on the tech side, we brought in a new CTO, Rafi Murthy from Verizon Media. This, again, is an emphasis. I've spoken about this several times, but we have to be a technology-first company, and to do that, we need great technology leadership. Rofty brings a world of experience to us, and as we move from our multi-stack, multi-domain enterprise that we've had historically into one platform that can serve as all our brands and all our business partners, It was really important to have great technical leadership across the organization. So I won't belabor every technical gain, but we are making real progress. We have plenty of work still to do, but we are feeling quite optimistic about Rathi and the changes that she is bringing. So in general, as we watch COVID play out, we're focusing really on investing in our technology and people. organizing our brands and allocating capital appropriately among them, simplifying our business, and, of course, maintaining the rigor we've had around driving margin improvement. And more broadly, we believe that as vaccines continue to roll out across the globe, that will bring greater security, greater comfort, and greater willingness to travel. But the road may still be bumpy for a while as we watch all the variants play out and various government responses to them. I'll just close by saying we launched today something very important to us that our employees are passionate about, which is a partnership with UNICEF wherein we will drive for every app transaction we have. In the company, we will donate to UNICEF to drive vaccination into the developing world. It's clear that not everyone has the access that the Western world has to vaccines, and it's our view that until the world is more fully vaccinated, we really can't expect travel broadly to be back to normal. We believe in the movement. We believe in the equitable distribution of vaccines. We want to drive that for all the obvious societal benefits and ultimately because it's good for our long-term business goals. So with that, I will turn it over to Eric. Thank you.