Expedia Group, Inc.

Good day, everyone, and welcome to the Expedia Group Q2 2023 Financial Results Teleconference. My name is Colby, 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 the number one on your telephone keypad. If you change your mind, please press star followed by the number two to cancel your request. For opening remarks, I will turn the call over to SVP Corporate Development Strategy and Investor Relations, Harshit Vash. Please go ahead.

Welcome to Expedia Group's second quarter 2023 earnings call. I'm pleased to be joined on today's call by our CEO, Peter Kern, and our CFO, Julie Whelan. As a reminder, our commentary today will 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. And unless otherwise stated, any reference to expenses excludes stock-based compensation. 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. Actual results could materially differ due to factors discussed during this call, and in our most recent forms, 10-K, 10-Q, and other findings with the SEC. Except as required by law, we do not undertake any responsibility to update these forward-looking statements. Our earnings release, SEC filings, and a replay of today's call can be found on our investor relations website at ir.expediagroup.com. And with that, let me turn the call over to Peter.

Thanks, Arshad, and good morning, and thank you all for joining us today. Travel demand has remained robust, and we are pleased to see our continued execution result in solid performance for the second quarter. As gratifying as those results are, I'm even more excited with the progress on our platform transformation journey, having just launched OneKey in the U.S. and continuing to be on schedule with our verbal migration. We are particularly pleased that we were able to meet our second quarter financial goals while electing to move some marketing spend from Q2 to Q3, where we believe it can be better spent in support of the launch of OneKey and our accelerated growth in the back half of the year. Industry trends have remained broadly consistent with the first quarter. Amanda, North America and Europe has remained stable with stronger growth in APAC and Latin America. Travelers worldwide continue to favor shorter stays in urban locations versus longer trips in sun and ski destinations. As far as pricing, both hotel and vacation rental ADRs are holding up year over year, while international cross-border airfares are stable. U.S. domestic airfares have seen some declines as capacity increases. Rental car rates continue to decline as inventories normalized from compressed levels last year, resulting in more attractive prices for consumers and more transactions. Overall, the data continues to show that travel remains a top priority for consumers. As I've explained before, our B2C strategy is to build products, features, and customer propositions that attract and help us retain valuable customers, and to move those customers into loyalty membership and app usage to amplify their value. These travelers drive higher profits per transaction and higher repeat rates, ultimately leading to higher lifetime value. In addition, as these customers have a higher propensity to come to us through direct channels, this helps us drive future leverage in sales and marketing. As a combination of all these factors, these travelers have a much higher return on investment and ultimately drive more profitable and faster growth as they stack up over time. As we continue to move from a purely transaction, room-night-focused world, to one in which we focus on customers and lifetime value, we've been able to build a bigger, more valuable base of these high ROI travelers. Our focus on acquiring and retaining loyalty members and app users to drive this strategy continues to show good results. This quarter, active loyalty members continued to hit new highs and were up 15% year over year in our core brands, and the percentage of bookings coming through our apps was up 300 basis points sequentially versus the first quarter. We know that members with the app have the best economics, which is why we've been so focused on growing this segment of customers. In our Expedia brand in the U.S., I am pleased to say that we have seen this cohort of customers increase roughly 135% versus 2019. As we roll out our strategy across all our brands and all our markets, there remains significant opportunity to accelerate further. A couple of weeks ago, we took another major step forward with the launch of OneKey in the U.S. This is the most flexible travel rewards program in the industry with our core brands unified under one loyalty program offering our customers the ability to earn and use one key cash, a simple common currency, across our vast breadth of flights, hotels, vacation rentals, car rentals, cruises, and activities. In addition to the breadth of this program, this marks the first time any major vacation rental marketplace will have loyalty. which is a significant differentiator against our competition. It's early days, but as we have seen historically, our loyalty members are much more productive, and with this now best-in-class program spanning our biggest brands, we expect to drive many more customers into the program and substantially increase our base of loyal travelers. Overall, our B2C business is finally nearing the end of its major changes and piece by piece getting the benefit of new capabilities and greater agility that comes from a unified stack. With one key out the door, our last major tech lift is the Vrbo migration to our main platform. We have already moved 100% of our Vrbo US web traffic to the platform and are on track to complete the migration during the fourth quarter. As we've explained before, we expect some modest headwinds to conversion as we transition, but ultimately the payoff is well worth it with better conversion, increased feature velocity, and ultimately better performance from Vrbo overall. Our single tech strategy is designed to give all of our brands the benefit of our entire suite of product features, including our latest advancements in AI and machine learning, to personalize and enhance the customer experience. On the topic of AI, earlier this year, we launched conversational trip planning powered by ChatGPT and the Expedia iOS app. And last month, we launched it on the Expedia Android app. We have been learning from consumer interactions and are adding a number of new features to help consumers on their journey of discovery. Travelers can now start a new conversation by choosing from suggested prompts, and soon they will be able to return to a conversation at any time and even respond throughout a conversation by simply choosing a suggested response, all of which is designed to bring them one step closer to booking their desired trip. Beyond the growth and progress we've seen with our brands, we continue to see tremendous momentum in our B2B business, which grew revenue 32% year over year in the second quarter. Our B2B business has greater exposure outside the U.S. and has benefited by continued opening of markets around the world. The engine for our B2B business is fueled by the same technology, supply, and service that serve our own brands. And as we have advanced in all areas over the last several years, this has only added to the velocity of our B2B business. We believe we have the most successful and differentiated B business in the travel world, with a large addressable segment still available to penetrate further. And our wins in the marketplace continue to demonstrate that point. In the second quarter, we announced a new partnership with MasterCard, where our tech will power MasterCard's global network of issuers so that their customers can spend their loyalty points on great travel experiences. And in another huge development for this segment, we've teamed up with Walmart, where we are now powering their first-ever travel benefit for Walmart Plus members through our white-label template solution. We also continue to expand our tech delivery to our existing partners, not only through our core Travel OS products, but through our expanding offering of solutions. After recently commercializing our fraud prevention capability, I am happy to announce that our revenue performance API is now in pilot with one of the largest hotel management companies. As our tech continues to advance, driven by our industry-leading AI capabilities and the acceleration of our single and platform strategy, there is much more opportunity to gain wallet share with our existing partners and to scale further with new partners. So overall, I'm very pleased with the momentum we now have in our accelerating product improvements as we move towards the second half of 23 and beyond. Over the last few years, we have taken on many difficult challenges in order to transform not only our tech, but our entire strategy. As we begin to emerge from this period of massive change, it is clear that we are building the best offerings for travelers, a better marketplace for our partners, and overall a better company. It is great to see so much finally come into fruition, and our entire organization is excited about the future. And with that, let me hand it over to Julie.