Expedia Group, Inc.

If you wish to ask a question at the end of the presentation, please press staff made by one on your telephone keypad. If you change your mind, please press staff made by 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.

Good afternoon and welcome to Expedia Group's third 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 filings in 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 in our investor relations website at ir.xpediagroup.com. And with that, let me turn the call over to Peter.

Thank you, Harshit, and good afternoon, and thank you all for joining us today. Our third quarter results came in ahead of our expectations with record revenue in EBITDA. This was particularly gratifying considering the fires in Maui, which had a disproportionate impact on our Burbo business and put pressure on the top line overall. Travel demand otherwise remained solid, with broad trends consistent over the last few months. North America and Europe demand remains stable, with more pronounced growth in APAC and Latin America. Prices also remain stable, by and large. Hotel and Vrbo ADRs are holding up in each region, but mixed effects are leading to a slight year-over-year decline in overall lodging ADRs. Conversely, we have seen some modest price pressure in air and car. We are also keeping a close eye on the escalating violence in the Middle East, which appeared to have some impact on global travel in early October. More relevant to our specific performance, I'm happy to share that we've just completed the final leg of our Vrbo migration onto our single front end stack with the conclusion of our global launch of the new Vrbo app this past Monday in the US. This marks the last of our major migrations associated with our multi-year transformation. It has been a long, complex journey, but well worth the effort as we are now in position to accelerate into the future without the drag of transformation work that forced us to go backwards in order to go forwards. We are now in positions that dramatically increase our test and learn capacity and feature release velocity, while also providing a scalable and efficient base to operate upon. We continue to utilize our industry-leading AI and ML capabilities to radically improve all aspects of our traveler experience. And with the launch of One Key and our increasing ability to understand the long-term value of our travelers, we can now begin to drive faster, more profitable growth. Moving on to the key pillars of our performance, starting with our category leading B2B business, which remains on track for a strong year with Q3 revenue growing 26% versus last year. We're winning new deals, increasing wallet share with existing partners, and launching new products and features to support our growth. Demand from China in particular continues to pick up with Q3 bookings from China partners up over 150% year on year. We anticipate continued strength from B2B going forward, driven by our continuing push into the addressable market, along with the advantages that our platform improvements will bring to the B2B business, whether in core technology, the application of AI and machine learning, or in service and payments. As we unify stacks, this will also further enhance the capabilities on offer for our B2B partners. But as pleased as I am with the continued growth of our B2B business, I'm even happier to see our B2C business picking up momentum with year-over-year revenue growth in Q3 accelerating over 400 basis points sequentially. This is what we've all been working so hard for, so it is very gratifying to see these results beginning to improve. Another major milestone for us was the U.S. launch in July of One Key, our new loyalty program. One Key unifies our major brands of Expedia, Hotels.com, and Vrbo, allowing our members to earn and burn one simple currency, One Key Cash, across our vast marketplace. As I've mentioned before, getting dividends from a program like this will take some time given the frequency with which most consumers travel. That said, we are very happy with the early results and traction One Key has with our members. We have already migrated over 82 million members to the program, and with the addition of Vrbo to the mix, we have seen 34% growth in new members over last year. We have already seen many members using One Key Cash across brands, including on Vrbo, and have been pleased that Hotels.com members have not been unduly impacted and have already been using One Key Cash to shop for other products on Expedia. Overall, these promising results have given us solid learnings that will be useful as we launch One Key in other countries next year. And with the Vrbo migration complete, we can now more fully lean into the core differentiation that One Key gives Vrbo in the vacation rental space. One Key, along with our ongoing efforts to more generally attract higher lifetime value customers, is accelerating our mix of loyalty members, app users, and app members. And the percentage of bookings coming through our apps continues to grow and was up approximately 300 basis points sequentially in the third quarter, which ultimately contributed to our year-over-year marketing leverage in our B2C business for the third quarter. We have also been releasing exciting products and features that remove more and more friction from the planning and booking process. In September, we announced our fall release showcasing a series of new features and products squarely aimed at solving complex traveler problems and enhancing engagement. In case you missed it, I'll give you a few of the highlights. We have simplified group travel planning, providing for the first time one place for friends and family to collaborate on a group trip, to see one another's selections, and add saved options across area lodging, car rentals, and activities. significantly easing the group planning process and creating a better, more successful trip for everyone. Products like these not only enhance the consumer experience, but allow us to utilize a consumer's own network of friends and family to expand our reach. We've also launched tools to aid research into a given destination, hotel prices, weather, best times to visit, crowd levels, and even generative AI-powered tools to determine the best neighborhoods to stay, giving the traveler one place to research where and when to stay in their dream location. We now also leverage generative AI to scrape reviews to answer traveler questions about amenities and property details. So no more sorting through hundreds of reviews to find out how strong the Wi-Fi is, the quality of the pool, or whether you're going to like the breakfast. We also launched the first project of its kind, EG Labs, which allows interested customers to test our AI-powered beta products, allowing them to play a hand in how we shape the future of travel. I could literally go on and on, but the takeaway is no one in travel is innovating faster than us, and with so much important platform work behind us and with our leading capabilities in machine learning and AI, we will out-innovate in the space for many years to come. We have literally worked for years and given up many short-term opportunities to get to this place, and I don't believe anyone is in a better spot technologically, which is not only exciting for our existing business, but sets us up to go back on offense in many more markets next year. In closing, I'm pleased to see our solid execution in Q3 and through 2023 so far. While the geographic mix of business distorts global growth rates, we believe that we have held or grown hotel gross booking share in virtually all of our key markets, and with Vrbo finally completing its migration and the key differentiator of OneKey, we expect our vacation rental share to improve going forward. In addition, we are finalizing our plans for 24, where we expect to drive faster and more profitable growth. Our high-level strategy is not going to change. Best product, best loyalty program, best marketplace, and best service. But instead of spending most of the year doing surgery on our own business, we will be focused on growth, innovation, and efficiency. I'm excited for 2024 and beyond and for what we will bring to our travelers, partners, and shareholders. And with that, let me hand it over to Julie.