Expedia Group, Inc.

Good day, everyone, and welcome to the Expedia Group Q1 2022 Financial Results Teleconference. My name is Jason, and I'll be your 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 our IR director, John Charbonneau. Please go ahead. Sorry about that.

Great, good afternoon and welcome to the VJ Group's financial results conference call for the first quarter and in March 31st, 2022. 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, reflect management's view as of today, May 2nd, 2022 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 reconciliation 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 consistently visit our IR website for other important information. Unless otherwise stated, any reference to cost of revenue, selling and marketing expense, general and administrative expense, and technology and content expense exclude stock-based compensation. And with that, let me turn the call over to Peter.

Thank you, John. Good afternoon, everybody, and apologies in advance. Eric and I are both recovering from a cold, so our voices may not be as loud as normal, but we'll do our best, and please ask for clarification on anything you can't hear. Let me start by saying we were pleased with the quarter. We continue to see strong demand coming back. We continue to see efficiencies in the business. And in general, it pretty much had the shape we expected, which is to say that we went into the quarter with Omicron looming. Last quarter, we mentioned that we expected that to have some impact early in the quarter, which it did. But we're very pleased that demand came back post-Omicron, and Omicron lived up to sort of our expectations, which were that it would be the shortest wave, it would be the least impactful. And I think as we now go into BA.2 and other things we're seeing, it's really hard to even detect the blips anymore. So that's great to see. We also then were hit with the war in Ukraine, which did have some impact on the EMEA markets. But again, the market, the consumers seem to absorb that information and now EMEA is back to its highest levels since COVID hit. So again, we've seen these impacts, but in each case, a recovery that seems too strong to be held down. The recovery has been strong, and nicely we have seen it beyond just domestic travel, which of course has been the bright spot for a long time during COVID. We're now starting to see city business pick up, business travel pick up, international travel vectors pick up. And I would say broadly, while some geographies lag, all geographies are in general growing and returning. So despite the usual caveats for COVID, Now we have rising inflation to worry about and, of course, the geopolitical situation. The pent-up demand that's out there for travel seems to be outweighing anything the market can throw at it, and we continue to be feeling very good about a summer recovery that should be very robust. And as I've said before, we've been spending into that recovery, particularly with an eye towards driving long-term customer engagement, buying the right customers, having the right mix of marketing to attract direct and long-term valuable customers. So with an eye towards lifetime value, we are investing into that strong recovery and we'll continue to do so. As an example, our teams have done a great job of driving Vrbo and app downloads. Vrbo, according to our third-party data, from a company called Sensor Tower, was the number one downloaded app in North America in the first quarter of the year, and that's a place where we've had emphasis. Obviously, our emphasis will change through the year, and we'll push into our other brands as well, but app particularly is a place where we feel like there's a lot of long-term customer value. We're improving that product dramatically, and we think that's a great place to put capital right now. Importantly, our direct-to-consumer business is only part of the business, and we have our big Explore event coming up over the next few days in Las Vegas, where I am right now, and I'm pleased to say it is packed, and business seems to be booming at the hotels. But that event is with our business partners, all our supply partners, as well as many partners with whom we drive demand. And I've talked about this a little bit before, but we have a thriving B2B business I haven't spent a lot of time on it, but this is the week where we will now come out and display all the work we've done to reimagine the future of our business and our place in the travel ecosystem and what we've been doing for the last two years. So we're going to share that with our partners with a general focus on overall traveler experience, how we're rethinking our marketplace, and how our platform technology will not only drive our B2C business, but will enable our partners to do much more with their own businesses. And even though I haven't spent a ton of time talking about it, I just want to reframe that our B2B business is a terrific business, was before COVID, remains a strong business, and we've made a lot of progress during the time of COVID to continue to expand that business, including one example, which is optimized distribution, which I think I've touched on before, but this is a product that we started in partnership with Marriott, We now just had IHG join this year, so two of the largest global hoteliers in the world, as well as many others testing on it. And what it does essentially is it cleans up the wholesale business for these partners. So wholesale rates have been a huge issue in the meta universe. They get bled out into the world and then find their way back into meta, and they end up hurting hotel companies because there are prices out there that are under the brand.com prices. We created technology to thwart this and basically help our partners get the same B2B business and more in the wholesale markets, but do it in a way where their prices would be protected and they'd make sure they weren't undercut by their own prices out in the world. So it's been a hugely successful program for Marriott, now IHG again, and we hope many more partners will take advantage of the technology. But that's just one example of the many things we are working on. I talked about externalizing our technology before. We've had a white label template in a lot of ways where our partners can sell other products. We have airlines with whom we power packages and hotel paths. We recently added Delta to power their car path. We've expanded our offline travel agent business and our share of wallet with our API partners. So it's a great business. We see expansion for it and as we'll talk about a lot more this week at Xplor. we have a lot more ways, we think, to help our partners and expand the addressable market there. So as we move into that, we will continue to accelerate innovation in our platform, and that innovation will drive not only our B2C business, but also our B2B business, and that's why we're so excited about how we're rebuilding our platform. But all in, we expect 22 to show continued recovery. We expect a robust summer. We expect to continue to drive efficiencies through the business. And the real work this year is on delivery, on delivering on the brand work we've done, which looks great so far. We're rolling out newhotels.com brand work right now, and I think the brand teams have done remarkable work. We've got a lot of new product innovation coming this year, and we're doing a ton of work on the back-end platform. So all of those things will be rolling out this year, and we'll have some impact on this year, but really the impact is much longer term, and we see great things ahead as those products all get delivered. So with that, I hope all of you can join us at Explore. It's going to be a great event. Our team has worked their butts off to put on an amazing event for close to 3,000 partners who are here. And if you can't make it, I invite you to watch the streaming. And it should be really exciting. And it's a chance for us to really display the work our teams have been working on for the last two years and all the painstaking time and effort they've put into changing our direction for the future. With that, I will leave it there. Great.