Expedia Group, Inc.

Good day, everyone, and welcome to the Expedia Group Q3 2021 Financial Results Teleconference. My name is Charlie, 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. For opening remarks, I will turn the call over to SVP and CFO Retail, Patrick Thompson. Please go ahead.

Good afternoon, and welcome to Expedia Group's Financial Results Conference Call and our CFO, Eric Hart. The following discussion, including responses to your questions, reflect management's views as of today, November 4th, 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. with that, let me turn the call over to Peter.

Thanks, Pat. Thank you all for joining us today. Eric and I will make some brief comments and then, of course, take questions. Let me begin by saying we're very pleased with the quarter we had in Q3, nearly matching our adjusted net income in the EBITDA from 2019, but I would add that, but for Delta, this would have been our most profitable quarter ever, and I think it's a tremendous milestone for technology, and to run the business more efficiently. And with that performance and what we're seeing in the market, we have the confidence to further pay down our preferred stock, which we did a few weeks ago, as you would have noted, which, of course, is another big milestone for us, putting COVID behind us. As far as the trends for the quarter go, I'll do high level and Eric will give a little more detail, but we went into the quarter following a strong Q2 and good momentum, but as we remarked last quarter, Delta had begun to have impact. We saw it impact cancellations. We saw it impact booking trends. But as we got through August and into September, the Delta fears, particularly in the US, began to wane and we ended stronger in the back half of September and that has continued through We've seen improvement across all segments, really. Well, leisure and domestic have led, even though segments which have been harder hit, like corporate and international travel, have been coming back. Cities have been returning as well. And so, all in all, it's been a broad-based recovery, but it has been led, obviously, still by leisure and domestic travel. And for us, Vrbo has been a particular highlight and beneficiary of that. A few highlights on Vrbo, since you always ask. We've seen a strong share growth in our focus markets, and in particular in the U.S. About half our customers so far in 2021, more than half have been new customers. We expect to book in excess of $2 billion of earnings for new Vrbo hosts who came on the platform this year. And looking ahead, we're already seeing better bookings for next summer than we saw this time last year. So the trends continue to be quite strong there. And while the story will continue to be impacted greatly by mixed effect, which I've talked about before, we are feeling more and more confident. And as international vectors open up, which you've no doubt all read about, this is a particular strength of ours historically. And we think, again, that is a mixed effect, which will generally benefit us. And COVID recovery, of course, remains somewhat bumpy and is unpredictable, to say the least. But we are feeling good and at every turn we are seeing demonstrated that when people can travel, they will travel for business, for pleasure and everything in between. And we are looking forward to seeing the rest of our business return. In terms of some of the details in the business, on the marketing and brand side, our focus continues to be on bringing customers efficiently back to the platform and retaining those customers for the long term. and building those long-term direct relationships. Obviously, the better our product is, the better our customer experience is, and the proposition, all those things add to that direct relationship, and we are feeling confident about the work we're doing on all fronts, but marketing, of course, is the tip of the spear, and with our new focus on being a family of brands, we have announced that we will be launching one loyalty program, which will actually cross all our brands and all our products. We think it will be the most powerful loyalty program in the industry. And we are really excited about bringing that extra usability and added value to our customers through that loyalty plan because when we get to a place where people can use it across all brands, across all products, we think that just adds tremendous value to the customer. And you should expect to see us do more of that. We will be looking for more ways to unify our brands in a united front of bringing value to the customer in every way we can. We spent the better part of the last six quarters building out the organization and in particular in the last few months building our creative organization. We've improved, as I've talked about before, all our performance marketing tools and technology and we're very excited about our position right now. We pulled back somewhat, and now again, we are seeing things growing and the recovery building again. We are leaning back in. We intend to go on the offense with all the new tools we have in our arsenal and our marketing group, and we expect to go on offense and expand share across the world. On the B2B front, which we haven't talked about a lot in the past quarters, I just want to highlight a few things here. We brought our groups together, as I remarked last quarter, our supply team and our business called Expedia Partner Solutions, which is a business we have used to power other partners in the travel industry. We brought those together officially in the last few months, and we're seeing lots and lots of opportunity for those businesses to build on the relationships we have with our supply partners, with our B2B partners, and find increasing ways to drive their business and drive their success on our platform. But in particular, UPS itself has done well Even during COVID, we've won wallet share with our partners. We've had many new signings. And for the first time in late October, we actually booked more business than we did in 2019 in that business. And that has continued into November. So great signs there. And then finally, on the Agencia front, you've all seen earlier this week, we announced the conclusion of our transaction with Amex GBT. We have merged Agencia into Amex GBT. We will retain a significant equity interest. we believe will be coming roaring back. And Agencia, even during this time of transition, had its highest signings this year that it's ever signed in terms of new clients in the first half. So lots of good signs there. But I think that deal is also emblematic, as I said before, of our desire to power more of the industry. We want to power MXGBT with our Expedia Partner Solutions business, with our technology, with our supply, and that is something we will continue to build on as the months and years unfold. So very exciting, and I just want to thank the Agencia team who did a tremendous job building that business, getting it to a place where we could find such a great transaction to put it together with someone else, and working through the time we had during the transaction and doing just a terrific job. So I thank them and our Agencia team that helped close that transaction. And then finally, while I've talked a lot about technology in the past, and I will keep this brief, I am as excited as I've ever been since I started about 18 months ago about where we are in terms of our technology evolution. We certainly have a lot of work left to do, but it can't be understated the importance of finally being aligned on our technology, on our roadmap, on our architecture. We have one plan and everybody is rolling together and our velocity is increasing and I think delivery, most importantly to the customer, will increase along with it. But just for clarity, on the front end, we're focused on being at first data and design driven and focused really on personalization and using all the data and machine learning and the opportunities to create better and better experience on one pool of data that serves all the outcomes, all our partners, all our customers, and it's really getting exciting. And finally, I just want to say this moment for us is really important as we move into 2022. Getting all of this aligned, getting the work streamlined, getting everybody on the same roadmap is a really powerful opportunity, and it reminds us that we're finally getting to what we wanted to be getting to, which is delivering new value to the But we are now in a position where the entire company is aligned. We can see the light at the end of the tunnel in terms of COVID. And the opportunity to innovate for the customer and bring great new products and value are really exciting to us. And we're looking forward to doing that. And with that, I will pass it over to Eric. All right.

Thank you, Peter. I'm also pleased, as Peter mentioned, with the overall recovery. that, I wanted to start by providing an update on the booking trends that we have seen and we are seeing. Following the pullback we witnessed for much of the third quarter and into the first part of September due to the Delta variant, we saw a notable broad-based improvement across geos and product lines. Overall total bookings for all products net of cancels were down 30% versus third quarter of 2019, which was slightly worse than the 26% decline we saw last quarter. Given the continued volatility of the recovery, we also approximately 25% in August, 19% in September, and further improved to down negative 2% in October. And again, that September was also down, of course. The trends in October that we saw, again, that was negative 2%. They did improve throughout that month, so we exited at a much improved rate relative to the start of that month. Moving to the P&L, starting with revenue, it was down approximately seasonally strong summer travel. Revenue margin for the third quarter was approximately 16% up from approximately 10% last quarter. This was primarily due to typical third quarter seasonality in the business, and product mix weighted towards lodging. are again leaning into marketing spend in Q4. Moving on to overhead costs, they totaled approximately $530 million, a slight decrease versus last quarter, and below our expectations. as headcounted in people costs. In total, adjusted EBITDA was approximately $855 million, which is approximately a $650 million improvement over the last quarter, driven primarily by typical seasonality. Moving on to free cash flow, which totals negative $1.4 billion MQ3 on a reported basis, if we exclude the change in restricted cash, which is primarily driven by the change in furbo's deferred merchant bookings, free cash flow was negative to approximately $450 million. and a low quarter for free cash flow due to seasonality. In terms of the balance sheet, we continue to be investment-grade rated today and remain committed to deleveraging back to more historical levels as well as further reducing our cost of capital. As you may recall, we refinanced some debt earlier this year, which yielded $80 million in annual interest rate savings. And last month, as Peter mentioned, given the improving trends and continued confidence in our liquidity position, we paid off the remainder of the preferred stock. In total, paying off all the preferred stock this year, it will save us approximately $150 million in annual dividend payouts going forward. Finally, on to Agencia, I want to echo Peter's comments and thank the Agencia team as $35 million in revenue and negative $18 million in adjusted EBITDA for, again, the third quarter. As it relates to Agencia costs in third quarter 2021, rough numbers, but approximately $35 million was recorded in cost of sales, $20 million in sales and marketing, and the remaining roughly $20 million was spread across tech, content, and DNA. Going forward, we will record our minority great stuff. In closing, as Peter and I both mentioned, we're quite encouraged by recent trends and the pace of recovery is clearly improving. Things are getting better. And I remain truly and very optimistic about the future of travel and our company. And so with that, Charlie, we are ready for our first question.

Of course. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. If you'd like to retract your question, please press star followed by two. Our first question comes from Naveed Khan of Truist Securities. Naveed, your line is now open.

Yeah, hi. Thanks a lot. A couple of questions. Maybe, Peter, maybe you can give us some color on your thoughts around marketing spend. Do you continue to see scope for more efficiencies here going forward, where do we stand today on this? And then the second question I had is just around the organizational structure going forward. I think you guys had outlined cost savings from the RE-ORG, $750 million in fixed costs and $200 million in variable. As we think about the organization build out from here on, where do you stand with respect to these?

Sure. We are still working towards a better marketing world for the company overall, which, yes, means more efficiently being able to get customers, but it's a many-pronged attack. It's the performance marketing issues that I've talked about before. We have come a huge way in terms of the tools, the data, and the algorithms, et cetera, but COVID has been a bumpy time, and we have not found normalized times to really get customers So yes, we believe there's opportunity ahead for that. We also believe there's significant opportunity for our brand teams to really be much more impactful than they have historically. And that has impact not only on driving direct customers, but it has impact on how people respond to performance marketing and other things. So there's many places where those teams can have more impact and ultimately be more efficient in attracting customers. But it's not entirely on them, right? We've got to build better products. We've got to have better engagement. every part of our game to continue to make the customer stickier and bring them back and want them, you know, make this their place to come for travel. So marketing can be more efficient, but it's really a virtuous cycle of how we string marketing together with the experience and with the new efficiency that your second question goes to. All of that gives us more opportunity to reinvest in more profitable long-term customers that create long-term value for the enterprise.

and the variable side. But I'll also add, we are a technology

Thank you, Peter. Thank you, Eric. Thank you.

Thank you. Our next question comes from Kevin Copelman of Cohen and Company. Kevin, your line is now open.

Great. Thanks so much. Could you dig in a little bit into the significant improvement that you saw in booking trends in October? If you could talk about kind of key segments, geographies at all, maybe Vrbo versus hotel. Thanks a lot.

Yeah, thanks, Kevin. I would just say generally, I know it feels bland, but we've seen it everywhere. Cities are picking up. International has picked up. Virtually every area has seen growth. I will say that some of the benefit we have seen, and I've talked about mixed effects before, when cities were forbidden places, that obviously hurt us. Cities have They're still greatly lagging major leisure destinations like beaches, but they're coming back, and that return benefits us probably disproportionately compared to some others. So that mix effect thing, we have some winners and some losers as always, but we've seen cities come back more relative to the growth we've seen in the consistently strong leisure areas. And the opening of international channels, you know, the announcements from the U.S., from Singapore, et cetera, about allowing international travel, we see that blip up basically as soon as it's announced. We see search queries go up. And again, in places like EMEA, where we're traditionally stronger in international travel as compared to domestic, for us going forward. So it really is a broad-based recovery. I mean, it is every, I mean, not down to every country because there are blips in countries that have COVID spikes, et cetera, but down to every region. And, you know, some regions are trailing dramatically like APAC and Latin America, but they're improving too. And so it's really broad-based and it's just

As we did in Q3, we passed the brakes on some areas of that just because we saw a bit of a slowdown. But so far, so good in October and going forward.

Very helpful. Thank you.

You bet. Perfect. Our next question comes from Deepak Mathivanan from Wolf Research. Deepak, your line is now open. Thanks.

This is Zach on for Deepak. Uh, just two questions. Uh, first, um, you know, your, your kind of large main competitor in the States reported last night. Your, your roommates are still lagging. I think it's down 33% in the third quarter, um, versus 2019. That's lagging, uh, kind of bookings performance. I just, is there any kind of, you know, driving force or explanation between, you know, driving that, that Delta and performance? Is it, you know, mix, you know, certain markets lagging? Is there a timing delay? I know there's, you know, difference in reporting structure. So any kind of color there would be helpful. And then just, um, On COVID restrictions, I know it's very dynamic and hard to predict, but are you seeing any differences in terms of travel restrictions and implications on demand when we see COVID cases rising in certain markets now versus six or 12 months ago? Thanks.

Yeah, thanks, Zach. A lot of good questions in there. I would say, first off, yes, you have to remember that they report on book, we report on state, so it's sometimes challenging to compare. But I would say, as I've said before, and I mentioned regarding cities, the mix has helped them. They've always been better in smaller markets, long-tail markets, et cetera. We've always been really strong in big cities. When cities were dragging, cities get filled by international travelers, and we also have been strong in long-haul air for those travelers. All those mix effects actually impact things. Some of them we won in. You know, Vrbo has been a beneficiary. Some of them we lost in big cities and international travel. So it's always been a balance. You know, we are less focused on room nights rather than, you know, room dollars, if you will. I mean, it's a little misleading. You know, we could book a million more one-star hotels nights, and it wouldn't mean much to our P&L. You know, and we could book 100,000. take it all in balance, but we are feeling good about the recovery. And in general, our numbers domestically are running ahead in lodging of where we were two years ago. So I think we're in good shape there and we feel good about that. And again, we have had a somewhat conservative bent along the game with COVID. You know, we've been, Eric mentioned tapping the brakes. We've tried to respond. Sometimes we get over our skis. Sometimes we're behind the recoveries. You know, it's a balancing act. But we are getting more confident, more aggressive, and I think you'll see us continue to lean in to gain share across the globe. In terms of the COVID question, you know, it remains to be seen and every, as Eric says, every story is its own. But I will tell you, if you look at recent news, for example, of the COVID cases in the UK spiking from recent, you know, openings, and I was in London and it was amazingly open. I would say that, you know, queries have remained elevated since the international announcements to the U.S., and they remain elevated, and we have not seen a pullback from, you know, the caseload news. So I think that remains strong. And, of course, science is helping us out along the way. You know, we just announced that kids will be able to be vaccinated in the U.S., which is a great, you know, benefit for society, let alone our business. And likewise, the announcement today about the UK approving the Merck pill for treatment. You know, this is, I think we all agree, is probably going to be an endemic, not a pandemic. And the more treatments we get and the more ways we get to deal with it, the better off we're all going to be.

Very helpful. Thank you.

You bet. Thanks.

Thank you. Our next question comes from Eric Sheridan of Goldman Sachs. Eric, your line is now open.

Thanks so much for taking the question. Maybe following up first on the growth initiatives when you're looking out against the recovery, are there any things we should be keeping in mind in terms of the ability to continue to grow supply or align some of your supply priorities, especially outside of North America, to capture as much of that growth as you can? And second question, guys, you know, coming back to capital return and how you're thinking about a more normalized environment, booking called out the ability to possibly return capital to shareholders as we get into early 2022. Any updates there on how you're thinking about return of capital on the balance sheet over the medium to long term? Thanks so much.

Sure. I'll take the first one and Eric can comment on the second one. But I would say that we continue to look tactically around the globe at what the right markets, freeing up a supply there, making that supply really successful right out of the gate. And that is the virtuous cycle that we think is most valuable. So you will continue to see us do that for Vrbo, but you will also see us do that in a very targeted way around the globe. And that's with a focus that's tied into where we are marketing, where we are driving our brands, where we think we have the opportunity to win. And again, remember, in many markets around the globe, Our B2B business, our Expedia Partner Solutions business drives those markets more than our direct relationship with consumers. And so driving the right supply to feed those businesses as well is a critical piece. So we will continue to drive into it. I would say, if anything, we've been relatively modest in terms of supply growth during COVID with a particular focus, again, on Vrbo, which was a different use case. But as things are reopening, we're seeing more demand You will see us go after, in a targeted way, more supply and, again, in a very targeted end-to-end way, keying on the markets we're focusing on growing and where those markets want to travel to. We feel very good about that opportunity.

Thanks, guys.

Thank you.

Thank you. Our next question comes from Mark Mahoney of Evercore. Mark, your line is now open.

Thanks. Just two quick questions. You referred to those growth rates for the four months, July, August, September, October. I'm sorry. Was that room nights or was that bookings? I know you said that generally all the regions are recovering. Just to be specific about it, and I know that there are flare-ups in countries' markets here or there, but in the major European markets like Germany, you have not seen a dampening of demand at the end of October recently. Thanks.

Yeah, I'll take the second part first, Mark. There are some blips here and there. but we don't feel those slips in quite the same way. And we had the countervailing issue of more interest in international. So that has probably offset some of what others may have seen. But, you know, yeah, there are blips here and there. But as I mentioned, you know, even in countries that are more COVID challenged, in general, we have seen sustained interest probably buoyed by the international vector as opposed to

Okay. Thank you both very much. Thank you.

Thanks. Our next question comes from Mario Lu of Barclays. Mario, your line is now open.

Thanks for taking the question. So I just wanted to ask about your comment on continuing to gain share and alternative accommodations in your key markets. Can you expand on the initiatives that you guys have made on your end to allow you guys to gain share and whether you think that is sustainable?

Yeah, thanks, Mario. Look, I think it's a combination of good work we've done and popular use cases. We know that the whole home solution has been a very popular solution during COVID, and that has helped us as compared to, say, apartments in cities where we might be less strong. But on the what are we doing side, we've done a tremendous amount to work on the brand, to land the brand, to make people really think about it as a primary source of, you know, Vrbo as a primary source of vacation options. We've invested more than ever, much more than ever in that brand, and we've really driven it hard. And as I mentioned, you know, more than half our users so far this year, our customers, the experience and the use case and the brand, and that will continue to benefit us for many years to come. How share exactly shakes out when the market moves back or people are going to cities, things will change. We're not strong everywhere in terms of Vrbo supply. We are more focused on leisure destinations. But we think we have sustainably put Vrbo in the minds of many people and other brands in other parts of the world that are strong, like states in Australia, et cetera, and that is really a powerful long-term benefit for us.

Great. And just a quick follow-up. In terms of the new users onto the platform, has those user behavior kind of matched those of prior users, or have they been stronger during this time? How should we think about the new cohort? Thanks.

Yeah, I think it's early to say. I'd like to tell you that people use verbos every two weeks, but they tend to need vacation time and they tend to need school vacations and other things. We'll know more as things unfold. But again, as I said, bookings for next year are already running well ahead of this time last year when there was a lot of pent-up demand for verbos already. So I think we are seeing the multiplication effect of out that they better book next summer, they better book next Christmas, they better book spring break, and that's really a powerful wheel, you know, cycle that works for us. So we're really excited that, you know, we've added so many happy customers to the experience, and we believe there will be tremendous long-term value from that. Great.

Thank you, Mario. Our next question comes from Doug Anmuth of J.P. Morgan. Doug, your line is now open.

Hey, this is Daniel for Doug Anmuth. Thanks for taking the questions. Hi, too. So first, Peter, you talked about improving the user experience a few times in your prepared remarks, so I assume combining the loyalty program is one of those, but curious to hear where you see the biggest opportunity looking ahead. And then secondly, could you guys talk a little bit about how your book-to-stay window looks like today and how that compares to what you saw earlier in the year and historically?

Sure. I'll take number one again and let Eric do number two. I would say, frankly, we see enormous opportunities across a wide swath of work to improve the customer experience. Some of that is yet CRM relationship with customers, how we give them information, how we reveal and give them discovery and find the right products and the right value at the right time. All of those things are real opportunities and ripe for innovation. We invented this industry 25 years ago, and I wish we had done more along the way to innovate for the customer. We've done a lot, but there's tremendous opportunity ahead for us in virtually everything we do, from service on the product, to how they discover and book multiple products in a trip, to how they get informed about cancellations or delays or other things in the trip and how the app becomes their companion in terms of the experience. We are working across all those fronts and determined to keep bringing innovation to the customer every week, month, quarter for the next many years in a way at a velocity we haven't done

and trend towards more of what we would have seen or expected in 2019, though it still is a bit skewed. So, for example, on the hotel side, it continues to be a little bit on the shorter-term side and a bit on the longer-term side at the macro level. So still a little bit impacted by COVID and booking patterns, but generally trending back to more normal levels.

Great. Thank you.

Thank you, Doug. Our next question comes from Jed Kelly of Oppenheimer & Co. Jed, your line is now open.

Hey, great. Thanks for taking my question. Just what you mentioned on the loyalty program across all the brands, can you sort of talk about how your tech stack is going to be able to do that and sort of merchandise, say, flights with Vrbo and developing more of like a vertically integrated tech stack around your loyalty program?

I wouldn't describe it quite that way, Jed, but the way I would think about it is we're building every domain that we own, so think loyalty, checkout, et cetera, to be multi-tenant and to work across our brands and our partners because we have many, many B2B partners. In doing so, we enable our brands, our multiple of brands, to live on one stack, to live in one currency if they wish, to allow you to earn that currency and burn that currency wherever you want. And, you know, this is one of the powerful things that, you know, we talked about new Vrbo customers coming on the platform, but imagine when they're not only in the Vrbo product stream and enjoying that, but then they're earning value that they can use across air and other things when they have different travel needs. And likewise, the inverse, you know, the Expedia and Hotels.com travelers who might want to rent a Vrbo for a vacation. So that expansion of being able to spend across all those brands, that architecture for our technology, which is really building everything we do into multi-tenant, ultimately having all our one app, all on one stack, and one way. That doesn't mean we want to separate brands, but they'll run on the same partners, and we have the richest data set, really, travel data set in the world. And that data set powers all our machine learning, all our AI, and our ability to innovate constantly in terms of what the customer sees, how the partners participate. And that's just super powerful once we get it right. Now, there's a lot of work still to do, but we can see the path now, and we're all aligned on that path.

And then any update on where you are in terms of having more verbal supply on Brand Expedia?

Yeah, I mean, it's tied up in the same question, Jed, which is we have verbal supply on Brand Expedia, but the experience isn't terrific. It's a little disjointed for the customer. We can't do everything. This is one of the many things that are the power of bringing these tech stacks together that allow us to seamlessly move content around onto different stacks It's not just one piece. It's not just about getting the content up. It's got to work all the way through the customer experience because we're in the business of getting and retaining customers, not just getting transactions. So that is a process we need to solve end-to-end, and it is more than just what you've historically heard about on, hey, can we get the content on brand Expedia? Now, we need to do it. It's a big opportunity. Frankly, it's one of a dozen of equal opportunity, but all of it is enabled by getting the tech right.

Thank you.

Thank you, Jed. Our next question comes from Andrew Boone of JMP Securities. Andrew, your line is now open.

Hi, guys. Thanks for taking the question. So with travel coming back and booking calling out, leaning into marketing channels yesterday, can you talk about any changes you're seeing to the competitive dynamics within performance marketing? And then question number two is, With, it sounds like, nice progress being made on the technology rebuild, kind of restacking, can you help us just more tangibly understand what this unlocks? Do you have any examples you can call out? Thanks so much.

Yeah, you're on my favorite topic there, Andrew, on the second one, which is there are myriad opportunities. We have massive opportunities. On the CRM front, we are not app first adequately, and the app is not a seamless product across all our brands. That's a huge opportunity. The ability to sell multi-product, which we've been the leader in in the industry for years, but honestly could be so much better at in terms of how our checkout paths work and how we get there. So there's, I mean, and everything I just said is measured in the billions or tens of billions of GBV opportunity, in my opinion. So I think they're really all over the place and many of them unlock and enable really big opportunities on the B2B front and our ability to power partners, power our suppliers, et cetera. So it's really, you know, I could give a dissertation for the next two hours on it if you want to miss the Airbnb call. But in the meantime, you know, suffice it to say that there are dozens of them around the company and they are big rocks and big opportunities. As far as travel coming back and our friends leaning into marketing, we've kept a pretty consistent model. We've leaned into brand marketing, and frankly, we've been leaned into brand marketing even when maybe our brand marketing could be better and sharper, and that's why we've rebuilt that team. We're bringing the creative teams in-house now and really going at it in a different way. But we expect to be balanced. We've seen our competitors move around and gyrate a bit. We've kind of kept to a balance between of performance. We feel like there's opportunity to be more aggressive as our performance marketing machine gets sharper and better and all the tools right. We're seeing vectors of opportunity that we can lean into. So we definitely will have opportunities to lean in and I'm really excited about what our brand teams are going to do, the best in the industry and our performance marketing is phenomenal and finally brought together in a way that will be really powerful so I think what that balance is you know we'll have to as I mentioned the market's got to normalize we don't exactly know yet but it is a virtuous cycle and the better our brand marketing is the better our performance marketing will do and we believe strongly in both and we'll continue to kind of lean in in a balanced way I think our friends have gyrated a little more than us in and out of some of those things

Thank you.

Thank you, Andrew. And our penultimate question comes from Brian Fitzgerald of Wells Fargo. Brian, your line is now open.

Thanks, guys. Very thorough call. We wanted to ask a little more color on the mechanics of the GBT Agencia deal. We think Agencia traditionally has gone to market with Low air fees and make up for that by making margin on hotels, leveraging the supply footprint. Just wanted to check on the mechanics and see if the margin there would be comparable to partner solutions as a whole or any other color there. Thanks.

also see it on that EPS side, not only for the existing Gen 2 volume, but also potentially upside with some of their other volume as well.

Yeah, and I would just add, Brian, that our goal longer term is to continue to export more of our technology to power more

Very clear. Thanks, guys.

Thank you.

Perfect. Our final question comes from Dan Vasilek of Morningstar. Dan, please proceed.

Hey, guys. Thanks for taking the question. So on the verbal booking strength you talked about for summer 22, wondering if you have any comments looking at rate and occupancy, the split between that and then the second one, Just direct mix, kind of maybe how that's been trending and how you see that direct mix evolving with the investments you're making in tech structure, Vrbo, and loyalty. Thank you.

Yeah, so I'll kind of take those in reverse then, I think, which is, you know, Vrbo has consistently had a very strong direct business. I mentioned our continued investment in brand across the globe, really, on Vrbo or its sister brands. The, you know, we mentioned, I think, or three quarters ago that we got out of performance marketing for Vrbo in the US and it benefited from that with more direct traffic and having felt the effects of it. So I think we feel very good about the direct nature of that business. As far as how the product will continue to improve, how loyalty will add to it, again, that's just other veins of opportunity for us across our Expedia customer base, our hotels customer base, et cetera. So we want to create that universe of people that want to move between our brands and use them and build value and use that value. So I think we will continue to see that. As far as rate and occupancy goes, rates have been – ADR has been very strong throughout COVID. There's been a lot of competition for the product, and owners and managers know that, and they have pushed price where they could. And so we've seen a lot of price increases, and those have helped. There seems to be no abating of those. And likewise, occupancy in those compressed markets. If you want to be on a beach in the southeast or on a beach in Hawaii at Christmas, good luck. It can't be done. So we're going to keep seeing that. I think that's why you're seeing this effect of, okay, I want to get out in front of next summer and get the house I want. And, you know, that's smart for the consumer, and it's great for the business, and it gives us a lot of confidence going into next year that, you know, this use case will continue to be highly top of mind for many consumers, and we are well positioned. So with that, I will thank you. Thanks, Dan. Thanks, everybody. I hope you all stay safe. Looking forward to watching travel recover, and feel free to start that corporate travel now that it's safe out there. Thanks for your time. Thanks, everyone.

Ladies and gentlemen, this concludes today's call. You may now disconnect your lines. Have a nice day.