TripAdvisor, Inc.

Welcome to the TripAdvisor first quarter 2025 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker for today, Angela White, Vice President of Investor Relations. Angela, please go ahead.

Great. Thank you, Felicia. Good morning, everyone, and welcome to TripAdvisor's first quarter 2025 financial results call. Joining me today are Matt Goldberg, President and CEO, and Mike Noonan, CFO. Earlier this morning, we filed and made available our earnings release. In that release, you'll find reconciliations of non-GAAP financial measures, to the most comparable GAAP financial measure discussed on this call. Before we begin, I'd like to remind you that this call may contain forward estimates and other forward-looking statements that represent management's views as of today, May 7th, 2025. TripAdvisor disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our earnings release as well as our filings with the SEC for information concerning factors that could cause actual results to differ materially from these forward-looking statements. With that, I'll turn the call over to Matt.

Thanks, Angela, and good morning, everyone. I wanted to kick off by acknowledging that last week we closed our merger transaction with Liberty Trip Advisor Holdings, in which we effectively purchased all of our shares held by L-Trip and no longer have a controlling shareholder. We also finalized our conversion to Nevada, a proposal that was approved by shareholders in 2023. As we passed this milestone, we couldn't be more energized about where we're heading. and how we'll continue to build on the progress of our transformation path. This means not only delivering near-term financial results, but also focusing on the biggest opportunities to differentiate and drive long-term growth, margin improvements, and shareholder return. Across the group, our vision is to be the most trusted source for travel and experiences, and we've been steadily executing a strategy to diversify our portfolio, optimize our legacy offerings, and shift our mix to our growth marketplaces. We see a number of opportunities ahead where we believe we're uniquely positioned to drive meaningful value, including scaling our marketplaces, starting with experiences, where we'll accelerate our momentum as a holistic global platform, delivering on our travel guidance strategy by leaning into our trusted brand, authentic content, high-intent audiences, and data to stabilize our hotel category. extending our leadership position in the dynamic European dining market, leveraging our unique assets to establish ourselves as the premier AI-driven personalized recommendation platform across all categories for any destination, and a capital return framework that delivers ongoing value for our shareholders. And now, turning to our performance for the first quarter. Our financial results exceeded our expectations with consolidated revenue of $398 million representing 1% growth or approximately 3% growth in constant currency, driven by our marketplace businesses. Viator and the Fork continued to deliver underlying growth rates in the mid-teens, with steady improvements in profitability, a direct result of our ongoing execution strategy of balancing growth, profitability, and market share. Consolidated adjusted EBITDA was 44 million, or 11% of revenue, which also exceeded our expectations. Since our last update, we've continued to make meaningful progress against our strategic priorities in the experiences category, as evidenced by the results in our Viator segment. Our bookings growth, revenue scale, and profitability progression reflects our disciplined approach to optimize our marketing channels as we grow our active customer base and gain market share in key geographies. Our market position is strong. Booked experiences grew 15%, and revenue grew 10% or approximately 12% in constant currency to 156 million. The adjusted EBITDA loss of 18 million represented an eight-point improvement in margin. These financial results were driven by strong operational execution that drove higher conversion, increased marketing efficiencies, and a larger, more relevant supply base for travelers. On the customer side, We continue to prioritize making the traveler experience in Viator the most easy to use, highest converting, and best in class experience in the market. We're accelerating our velocity of experimentation and rolling out product improvements that are driving higher customer engagement, more relevant recommendations, and a more seamless booking flow, resulting in an uplift in conversion. And our ongoing focus on the mobile app is driving faster bookings growth than other surfaces and continued progression of our unit economics, the result of an increasingly loyal user base and a growing portion of our bookings mix returning to our platform through direct channels. On the operator side, we're streamlining the onboarding process by providing new Gen AI tools that reduce friction and improve the quality of listings for new operators signing up on the platform. We're also expanding our supply catalog to secondary and tertiary markets, to enhance the breadth and depth of choice to meet the needs of consumers as their travel destination preferences evolve. Finally, our third-party partnerships continue to drive healthy above-market growth and allow us to serve incremental, difficult-to-reach travelers and geographies profitably. We continue to work across the group to leverage all of our assets and capabilities to accelerate our global position in the experiences category. our teams are finding new ways to take advantage of the complementary relationship between Viator and brand TripAdvisor with its broad geographic reach, depth of content, proprietary traveler clickstream data, and trusted brand. Given the strength of TripAdvisor's presence globally, we're also testing how and where to lean into marketing our brands optimally across geographies. Each brand serves different audiences in unique ways, but together we're identifying incremental growth opportunities as these teams collaborate across marketing, product, and supply to leverage expertise and drive our ambitions for the category. Turning now to travel planning and guidance in Brand Trip Advisor, where our first quarter results reflected the work we're doing across the platform to drive a better experience for travelers. Revenue was $219 million, a decline of 8%, and adjusted EBITDA was 65 million or 30% of revenue, both exceeding our expectations driven by more favorable pricing and hotel meta and prudent fixed cost management. In Q1, we continued to scale product improvements that yielded deeper engagement and drove financial outcomes. This is a direct result of our ongoing transformation work that puts the traveler at the center of an engagement focused experience rather than optimizing for click arbitrage. In the most notable example this quarter, we made enhancements to the hotel shopping journey that prioritize the needs of the traveler, including surfacing more relevant information and better context for their accommodation search. This drove a shift from a funnel optimized for same-session click revenue to a traveler-centric experience optimized for engagement, cross-selling, booking flow, and longer-term value. The result was a notable increase in traveler engagement along with higher quality traffic and a meaningful conversion uplift for our partners, which in turn yielded pricing strength and gave us the confidence to roll these changes out globally. We also made the largest changes to our mobile app in the last four years with an ambitious vision to deliver the world's best travel planning companion. We started by customizing and simplifying the onboarding flow. improving navigation, search, and destinations, and further integrating maps, trip planning, and a seamless nearby experience, all of which are key elements in planning and booking. We also rolled out an updated in-app hotel shopping experience that presents both booking and price comparison options, and we're seeing monetization improvements driven by better conversion, which isn't surprising given the importance of pricing for travelers as they plan and book their trips. While this is just the beginning, these changes are supported by a plan in the app marketing campaign that's driving early positive trends in app growth, revenue, and trip creations. Finally, we continue to enhance the product experience by further integrating AI across all of our services, focusing on providing contextual and personalized recommendations made possible by our billions of content and user combinations. Our popular AI review summaries that highlight the provenance of real travelers are now available across hotels, restaurants, and attractions. Our AI travel assistant provides conversational, intelligent, and dynamic recommendations based on traveler prompts. And we're leveraging AI to better detect fraud and moderate content, which enhances and protects our brand trust. Looking ahead, our teams at Brand Trip Advisor are laser focused on an execution roadmap to scale product wins across hotels, experiences, and the app. This includes expanding our in-app booking capabilities in hotels, leaning further into our membership proposition, compounding conversion wins and experiences, and scaling our investment in marketing throughout the year to drive deeper engagement and monetization. Turning now to our European dining offering, The Fork. Revenue this quarter grew 12% or 16% in constant currency to $46 million as we continue to diversify our revenue mix and drive monetization of our enhanced B2B software offering for restaurants. The adjusted EBITDA loss of $3 million reflects normal seasonality and a margin improvement of 100 basis points. The progress we've made in enhancing the quality of the product we deliver to our restaurant base is driving significant monetization improvements. with Q1 revenue growth from software subscriptions of over 90%. This growth stems from adoption by our existing restaurant base, as well as new restaurants, a clear signal of the strength of the value proposition we provide, and a testament of how our multi-year investment in product and technology is delivering results. Finally, the Vodafone partnership we signed in the second half of last year drove strong revenue growth in the first quarter, and we expect our partnership with MasterCard to start driving incremental financial impact in the second half of this year as that partnership goes live to consumers this summer. Across the group and in each of our segments, we continue to chart our AI future, leveraging our data investments to reinforce our unique and privileged position in the travel ecosystem. We believe that authenticity and trust will become increasingly precious and highly valued in an AI future and we're well positioned among the travel incumbents along these dimensions. We've established ourselves competitively for the opportunity ahead by leveraging our distinctive assets, our trusted global brands, high quality data and content from authentic travel experiences, scaled global audiences, and deep and diverse partner relationships across all categories and operators. These capabilities allow us to position ourselves as a trusted AI intermediary for travelers and create substantial value through rapid innovation in our own products and services, as well as by experimenting and learning through select partnerships. During the quarter, we added new strategic partnerships with Amazon Alexa and Microsoft Azure with a growing pipeline of other opportunities ahead. We're also harnessing the potential of AI across the company from customer service to engineering, content moderation and business analytics to marketing and supply acquisition. We're moving quickly but thoughtfully to create a culture where every one of our employees is obsessed with addressing evolving consumer preferences in the age of AI and embracing the tools available to serve them most effectively. Finally, I want to turn to an important topic, the backdrop of macro uncertainty. We recognize that travel isn't immune to slowing economic growth. Consumers have important choices to make when their personal balance sheets are pressured. Our business performance has been durable thus far in 2025, and we're closely monitoring our data for leading indicators. For example, experiences volume growth remains healthy, both sequentially and year over year, but we're monitoring early signs of pressure and average booking value and cancellation rates. Our data has reflected some of the anecdotal themes following recent policy actions. For example, the US share of international travel from certain source markets is down, particularly from Canada, and our share of domestic travel across regions is up. Still, we've not seen these translate into material changes to consumer travel intent or business impact to date. Consumers have largely defended discretionary spending in categories like travel, and especially experiences. Travel sentiment remains positive, with travelers continuing to plan leisure summer travel and putting experiences at the heart of their budgets. We believe we can benefit by serving travelers who are increasingly sensitive to price and choice, whether through price comparison or by offering the most diverse set of options in the experiences category across all price points, close to home or abroad. From what we see today, it would be premature to make a call on where things are heading. We'll continue to monitor and adapt to any potential near-term changes in the landscape but we're confident that travel remains a durable, long-term growth opportunity, and we are well-positioned to capture the enduring demand for travel and experiences ahead. With that, I'll turn the call over to Mike.

Thanks, Matt. Good morning. I'll start with a review of our financial performance, and later, we'll provide our outlook for Q2 and the full year. As a reminder, all growth rates are relative to the comparable period in 2024, unless otherwise noted. Consolidated revenue came in above our expectations at $398 million, a growth of 1%, and 3% in constant currency. Consolidated adjusted EBITDA of $44 million, or 11% of revenue, exceeded expectations due to the revenue outperformance at Brand Trip Advisor and lower than anticipated fixed costs, primarily in personnel and marketing. At Viator, the number of experiences booked grew 15%, which was in line with expectations for the quarter. Viator and third-party points of sale grew faster than the segment overall, offsetting performance at the TripAdvisor point of sale. Growth in our largest source market, North America, remained healthy, and overall booking windows remained stable year over year, with only some very recent narrowing occurring over the past month. Our third-party channels have been growing very fast, and remain an important strategic priority as Viator continues its journey on becoming the ubiquitous online platform in the category. The bookings that come through these channels are highly incremental and largely sourced from regions outside our core markets. While these bookings have a lower average booking value, they are immediately profitable and enable us to reach incremental travelers as we continue to scale. Gross booking value, or GBV, grew 10% or 12% on a constant currency basis to approximately $1.1 billion. The difference between the growth in the number of experiences booked and the constant currency GBV growth was due to the decline in average booking value, which is a result of higher mix of third-party bookings relative to the first quarter of 2024. Viator revenue grew 10% to $156 million, or approximately 12% on a constant currency basis, In addition, we estimate the timing of holidays was a nearly four-point headwind to revenue growth in the quarter. Viator adjusted EBITDA was a loss of $18 million and represented an 800 basis point margin improvement. Repeat bookings growth on Viator point of sale once again outpaced new bookings growth, and our cohort retention rates have remained consistent over the last few quarters, supporting the ongoing progression of Viator's unit economics as these bookings come at lower acquisition costs. In addition, our direct channel, which includes our app bookings, continues to show strong growth and is increasing as a percent of our overall mix. These trends continue to strengthen our confidence in the long-term margin opportunity for this business at scale. At Brand Trip Advisor, revenue was $219 million, a decline of 8%. Branded Hotel's revenue was $148 million, a decline of 7% and sequentially flat with Q4, exceeding our expectations due to more favorable pricing in Hotel Meta. Pricing remained strong as we exited last quarter and grew year-over-year throughout Q1 in both U.S. and Europe, a reflection of healthy demand and recent product optimizations that Matt described earlier, which drove higher value clicks to our partners. Pricing growth was offset by volume headwinds, which were expected and related to last year's challenging compare in both paid channels as well as the product changes Matt discussed earlier, which traded off lower click volume for higher quality clicks. While still down year-over-year in the U.S. and Europe, revenue growth trends improved sequentially. Median advertising revenue declined 6% to $31 million. Declines in traditional display and programmatic advertising revenue were driven by overall traffic volume dynamics, which offset growth in our off-platform revenue, including creative offerings and programmatic advertising. Experiences in dining revenue was $30 million, a decline of 15%. B2B restaurant revenue declines were due to our product-led transition to a self-service sales model. Entering the year, we expected experiences revenue growth at TripAdvisor would be challenged in the first half due to lapping revenue the short-term benefits we recognized last year in some product optimization testing, as well as remaining consistent in our ROI targets for this point of sale. Importantly, the brand supervisor point of sale remains very profitable, with well over half of the revenue coming through direct channels. We expect to see improved performance as we exit the second quarter through a combination of the lapping of these headwinds, along with our planned investment in product optimization and marketing. Brand TripAdvisor adjusted EBITDA was $65 million, representing 30% of revenue. Relative to our outlook in February, adjusted EBITDA was higher due to the stronger than anticipated hotel meta performance, lower than expected cost of sales, and lower personnel and G&A costs. Year over year, the leverage was due to lower revenue and contribution profit, which more than offset lower personnel and G&A costs. At the fork, Revenue was $46 million, or 12% growth, and 16% growth in constant currency. Growth was driven by a healthy mix of solid booking volumes in our B2C offering, which grew 9% in the Forbes direct channel, strong performance in our B2B subscription revenue, driven by higher adoption of higher-priced premium plans, and higher revenue from partnerships we announced last year. The increased penetration of higher-priced plans in our B2B offering is a testament to the product and technology investments we've made over the past few years, which have consistently translated into accelerating profitable growth. Adjusted EBITDA at the fork was slightly better than expectations at a loss of $3 million due to lower personnel and technology costs. Compared to last year, adjusted EBITDA benefited from lower personnel costs, which offset increases in cost of sales and marketing. Turning now to consolidated expenses for the quarter. Cost of revenue was 7% of revenue, approximately 100 basis points higher due to higher transaction-related costs at VITOR and The Fork. Marketing costs were 43% of revenue, an increase of approximately 200 basis points due to increased marketing spend to support growth. Personnel costs decreased by approximately 200 basis points to 36% of revenue, including share-based compensation of approximately $28 million, and was due primarily to this year's cost reductions at Brand TripAdvisor. Absent share-based compensation, personnel costs were also lower by approximately 200 basis points. Technology costs were flat at 6% of revenue, while G&A's percent of revenue was lower by 300 basis points due to an accrual for a potential regulatory matter of approximately $10 million in Q1 of 2024. Now, turning to cash and liquidity. Q1 operating cash flow was $102 million and free cash flow was $83 million. During the first quarter, we raised $350 million in an add-on to our existing term loan B. We expect to use the proceeds to pay down our convertible notes due April 1, 2026. In connection with the merger with Liberty TripAdvisor Holdings, or L-TRIP, announced in December of 2024, we loaned L-TRIP approximately $327 million for the redemption of its exchangeable debentures. Total cash and cash equivalents at quarter end included these activities was $1.2 billion. Subsequent to the quarter's end, we closed the L-TRIP merger. As a result, we retired approximately 27 million shares, issued approximately 3 million shares, and paid $42.5 million in cash to the L-TRIP preferred stock shareholders and $20 million in cash to the L-TRIP common shareholders. We canceled the loan to L-TRIP that was used to redeem the exchangeable debentures, as I just noted. The net reduction in shares is approximately 23.8 million, or approximately 17% of shares. Total cash outflow is approximately 393 million, with the majority of this being paid in Q1 and the remainder to be paid in Q2. Post-transaction and post-paydown of our convertible notes, cash balance is expected to be approximately 700 million, which includes our deferred merchant payables of $365 million at March 31, 2025. Now that we have closed the Liberty TripAdvisor transaction, we will restart our share repurchase program under our existing authorization, which has about $200 million remaining. We will pursue a more structured approach going forward with a target of maintaining our current cash profile and net leverage levels, which we believe is the right approach given our operating needs and considering the current macro environment. This implies we will utilize a portion of our future cash flow to repurchase shares as we see attractive prices in the market and a stable macro environment. Now I'd like to turn to recent trends in our outlook for Q2 and the full year. We've continued to see stable demand trends in April, and our guidance for the quarter largely assumes these trends continue. However, we recognize that the macroeconomic environment has become more uncertain, which could negatively impact our business. we will continue to monitor the travel environment for any changes. Starting with our second quarter outlook, we expect consolidated revenue growth of between 5% and 8% and adjusted EBITDA margin of approximately 16% to 18%. At Viator, we expect mid-teens growth in the number of experiences booked, revenue growth of approximately 9% to 11%, and adjusted EBITDA margin in the mid to high single digits. This revenue growth rate assumes a prudent assumption on pricing and cancer rates given some of the recent trends we're monitoring as per Matt's earlier comments. At Branch Trip Advisor, we expect a sequential improvement in revenue of flat to 2% declines year-over-year and adjusted EBITDA margins of approximately 26% to 28%. At The Fork, we expect revenue growth to accelerate sequentially to 26% to 28% which includes approximately six percentage points of currency benefit at current rates. We expect adjusted EBITDA margin to pick up sequentially to approximately mid-teens. Turning to the full year, we are pleased with Q1 performance and Q2 is off to a solid start. However, we believe it is premature to adjust our full year guidance at this time given the uncertain macroeconomic environment. We are maintaining our consolidated full-year guidance provided last quarter, which was 5% to 7% revenue growth and 16% to 18% adjusted EBITDA margin. With that, I'd like to turn the call back to the operator to begin Q&A.

Thank you. As a reminder, to ask a question, you will need to press star 1-1 and wait for your name to be announced. Please stand by while we compile the Q&A roster. Your first question comes from the line of Richard Clark of Bernstein. Richard, please go ahead.

Yes, a couple of questions, if I may. I guess the first one on the guidance. You've said it's premature to change the guidance. If you weren't seeing this macro uncertainty based on what you've seen in Q1 and Q2, is it fair to say that you would have been happy to take it up, but you're just maintaining it because of this macro uncertainty? And then secondly, you know, you've completed the Liberty buyout. You've completed the shift to Nevada. You know, over the next 12 months, what does this unlock? Like, what can we expect to be changed given this change in structure?

Yeah. Hey, Richard. It's Mike. I'll take the first one. Yeah, I think a few things. Like I said in the call, we're happy with Q1. We're happy with the way Q2 has started. We feel, but we do recognize there is a bit more macro uncertainty here. You know, I think we feel comfortable with our guidance framework that we presented last quarter, which is for the consolidated growth rates and margin profile. You know, I think as we move through the year, we're certainly put in takes with that. We see more progression at Branch TripAdvisor with the positive pricing that we talked about. You know, Viator, we expect to see continued strong unit growth. We're monitoring the impact, some impacts on revenue, some of the pricing we mentioned and the mix mentioned on the average booking value, which is a good thing from that mixed perspective. But we're also monitoring some cancel rates and how that could impact revenue as well. And so we still feel good that... where we are from a consolidated basis that that range feels appropriate in the background, in the macro background.

And Richard, thanks. I'll take that second question. You know, with L-TRIP behind us, I think there's a few things here. Our capital structure is just much cleaner and simplified. You know, we remove that notion of an overhang and the distraction that we've had as we've tried to work through that over the last year. I think we are very focused on aligning directly with all of our shareholders and will continue to have robust shareholder engagement. I think we have a real opportunity to simplify our story. It's been too complex in the past, and I'm really starting to focus very clearly on where we see the value drivers ahead. And I hit that across every part of our business as we shift to marketplaces that are performing much better as we continue on the transformation journey that's stabilizing TripAdvisor in our hotel category. We feel really good about how that's going. The AI story is one that we are really leaning into to find the ways that we can position ourselves for the future and learn and be ready to create the value as we see that coming on board. And then, of course, we're doing some things around governance. We have a new lead independent director. We're going to do some board renewal, which we think will be really helpful as we go forward. And we're just really excited about the flexibility that it provides us to focus and catalyze value.

Thank you.

One moment for your next question. The next question comes from the line of Ben Miller of Goldman Sachs. Ben, please go ahead.

Great. Thanks so much for taking the questions. I wanted to talk about Viator margins, and you had some nice marketing leverage there in the quarter. I'm curious, in your long-term margin framework for Viator, I think you've said OTA-like margins. I'm just curious what's contemplated there between kind of where you can drive marketing leverage from here, especially compared to global OTAs, versus any kind of incremental fixed-cost leverage that you see.

Yeah. Hey, Ben, it's Mike. I'll take that. Yeah, we reiterate our view that, you know, we believe this business can have OTA-like margins as we continue to scale. You know, the biggest thing to the margin achievement is exactly what the teams are focused on, you know, this year and moving into next year, which is really product-led growth. And that is all things around funnel conversion, the UX, you know, commercialization, etc., which we believe we can drive growth more efficiently with our marketing dollars as we improve conversion rates. So that is going to be the biggest driver of how we think about that margin increase. Now, we will be, as I said, and this year is a trade-off a bit of, you know, continue to see, expect to continue to see marketing leverage. But we are investing in some of the fixed costs, particularly in personnel, hiring engineers, data scientists, et cetera, to work on the product innovation. So there's a bit of a trade-off in the P&L you'll see this year, but just longer term, it's all about getting those conversion rates up and enhancing that user experience that we believe translates into that leverage over time.

And the only thing I would add, Ben, is just think about marketing efficiency, working with product, really driving conversion, loyalty, repeat, direct into the app, And then supply and the way that we're looking at expanding our supply, that becomes a flywheel that drives this whole thing and I think really drives both unit economics and that margin profile over time.

Great. And then just as a follow-up to that, I'm curious if you can talk about your exposure to cross-border at Viator. And in a world where you might see softer cross-border and or shorter booking windows, Are there any adjustments that you might make around marketing spend either in who you're targeting or which channels you decide to deploy dollars in? Thanks so much.

Yeah, thanks, Ben. Yeah, I would say, you know, Vitor predominantly is a North American booker base. So I think we are maybe less susceptible to some of these international trade route pressures that I think have been highlighted across many people's calls. And that doesn't mean we're immune. But I would just say we're probably less pressured from that. We continue to see, as I said, as we said in the call, the North America booker market continues to be healthy. They continue to travel internationally as well as domestically. And so we were able to capture a lot of that.

Yeah, just the depth of supply, the fact that we have all that supply really allows us to pick up on wherever anybody wants to go. And we know, we saw it during the pandemic as People were maybe less focused on Europe and more focused on US to US. We picked that up. It was a real growth driver for us, and we think our supply will allow us to pick up wherever they go and at whatever price point. That's one of the benefits of having the most scaled supply in the business.

One moment for your next question. The next question comes from the line of Nived Khan of B. Riley. Nived, please go ahead.

Thank you very much. Two questions, please. One on just the changes that Google seems to have made in recent months on its auctions for activities and experiences that seem to be favoring more of the operators. Are you seeing any impact of that, positive or negative, or any commentary would be helpful? And then the second question I have is on the average booking value. It was lower year on year, and I'm wondering if that's a reflection of customers choosing lower price experiences to book, or simply the mix of listings might have changed, and that's kind of getting reflected in the price here.

Hey, Neves, Mike. I'll start with one. I'll take two in turn. Matt can chime in where he wants. On the Google changes for experiences, I would just say I don't think anything surprises us that happens in the Google search for experiences. They're going to continue to experiment with different ad placements and how they try to get different people involved in their marketing platforms. That is expected. We will continue to be active and are involved in how we experiment and benefit from those. They continue to add different ad formats, which we are actively involved in. So listen, I think it's just continued opportunities for us and the team to be very nimble, think about, and we think about how exactly we play in that environment, how we utilize those different ad formats to find highly incremental and converting traffic, and we'll continue to do so. So it's a bit of our continued optimization efforts around all things Google. And then on ABV, ABV, which is the average, is a function or measure of price in our business, we have seen some pressure on ABV. That is predominantly a result of our third party mix that I mentioned growing faster. Our third party mix, which includes OTAs and others like travel agents and white labels, generally books at lower priced categories. And that's what is driving, predominantly driving that pricing pressure. On the margin, we see some very small increase in lower price categories, but very negligible thus far. And so really, Nevada, it's really a mixed issue. And again, this is, just to double click on this, this is an area of focus for us. We have been focusing on how we serve, particularly the OTAs, in a more effective manner. And we are investing behind this. So this is a good outcome from us. This, as I said in the call, This is highly incremental traffic in regions that we generally are not strong in. And so, again, that revenue, these units are very incremental. And they're very profitable. They're profitable day one for us. So, again, this mix, while it creates some pressure on price, is very much one that we feel good about.

The only thing I would add is that as you look at the consumer demand across ABV segments, Higher ABV items seem to be holding up well thus far. It's something we're obviously watching to understand what kind of bifurcation there could be, but higher ABV items are holding up well.

Thanks, Mike. Thanks, Mike.

Yeah? One moment for your next question. The next question comes from the line of Doug Anmouth of JP Morgan. Doug, please go ahead.

Hi, this is . Thanks for taking the questions. First one, could you expand on your comment about how travel will do in a slower consumer environment? More specifically, how you think experiences will spend with fare versus hotels and transportation spending if consumer were to weaken? And I have a follow-up.

Yeah, sure. I think the point is a general one, which is that we know over the long course of history that when the economy slows, the consumer has to make important choices, that when their personal finances get pressured, they will choose. As I said, they have been largely defending travel as a category and especially experiences. And that's what we've seen. Travel demand has been healthy in Q1 and through April. I mentioned that we saw some shifts similar to what others have said in the industry and We're watching our data very closely for leading indicators, but we don't see any. Experiences volume growth remains healthy, as I said, and while it's too early for me with my crystal ball to say to you what I think is going to happen, I want to recognize what we've seen historically and also give color to the fact that what seems to be happening is that the consumer wants to travel, is defending the category, and leaning into experiences. And that's what they're telling us. They are planning travel this summer, which is on par as they did last year. It can be a little bit stronger sometimes in those surveys with higher income travelers, so we're watching that. And we're certainly seeing resilience in the high value cohorts, which have been durable. And increasingly, and it has been consistent, that travelers will say they're prioritizing experiences in their budget and they're planning to book more experiences. That is up from last year. People who are planning to book three or more experiences this summer is growing over last year. So we think we're in a really good spot both as it relates to the experiences, the inventory we have to offer at every price point in whatever destination people are going to, and we certainly feel good about our ability to serve people as they think about, you know, thinking about choosing on price. So we feel really good about our setup.

Got it. That's good to hear. And then secondly, on branch supervisor, you talked about favorable pricing at Hotel Meta. I was just wanting to see if you can expand on the drivers of that improvement and how you expect pricing to trend for the rest of the year.

Yeah, this is a really exciting one for us because, you know, we've been talking a lot about how this transformation is going. And, you know, I think what we've said is, you know, we started by putting our teams against the strategy, deliver product work, leveraging AI, thinking across every category and all the surfaces. And what we're seeing now is that that product evolution is really not only driving engagement, but it's starting to translate into monetization that we think we can scale. So, What we did here was we improved our hotel user experience. And we looked at, you know, in the past, they would come and we would quickly try to get them off site. What we're doing now is we've added more information, more content, more context, so that they can really think through what they're looking for in that choice around accommodation. And what that's driven is a pricing uplift in the auction and an ability to further engage before we send them into Meta to monetize in new ways, to cross-sell as they're moving through that funnel. And so we see that as a very good proof point of our engagement strategy delivering a monetization opportunity that we can scale. Now, what this does is it helps us think about how we will stabilize the hotel category, and then we can think about these product improvements in other areas that will drive growth, like the app, where we we launched a whole new set of features in our experiences funnel, which can work in good compatibility with hotel booking. And that whole experience of booking hotels and experiences and ultimately restaurants, we think will be a real driver ahead. And that's why we gave you the color that we are progressing quarter by quarter and expect to end the year in a growth opportunity with TripAdvisor.

Got it. Thank you.

One moment for your next question. The next question comes from the line of Trevor Young of Barclays. Trevor, please go ahead.

Great. Thank you for the questions. You said a few times now that third-party distribution is highly incremental and also, I think, immediately profitable, so some favorable characteristics there. But at the same time, that doesn't really help Viator build its brand awareness How do we think about that tradeoff, particularly as, you know, booking is now getting a little more aggressive in the category, calling it out for the first time this quarter and quite a few quarters and also Airbnb relaunching? And can you also size how meaningful the large OTAs are in terms of distribution for Viator?

Yeah, hey, Trevor, I'll take that. So, yeah, I think the main point is that these are highly incremental for us, right, and largely outside of our key source markets. And there is an element of branding that we get just depending on different partner relationships. So listen, I think this provides good economics for us. It allows us to fuel scaling. It is part of our strategy as we think becoming a real experiences platform. And I think we're always going to be unique and different being a focused OTA on experiences. rather relative to other OTAs that are obviously selling many different products and services within the travel scale. The Viator point of sale is by far our largest channel still. And so that is obviously the focus of how we gain and attract customers. And as I said in the prepared remarks, we continue to see very good cohort behavior around repeats and loyalty, which we're very, very pleased with. So we think this is additive, and we think it helps us continue to scale and become that platform.

Yeah, it's additive, and it's profitable, and it allows us to invest and get the flywheel going. And I would just say, as we work with those third parties, it's a good way to bring the largely offline audience online, and then we benefit from that, not only with the incremental piece around third party, but then the ability to serve them through, as Mike said, a very focused OTA with distinct advantages as a vertical focus versus the horizontal focus that others might have. And, you know, the large supply base that we have, the highest scale really allows us to do it and allows us to be in front of travelers wherever they are as they come online. So I think that's an exciting growth opportunity ahead.

That makes a lot of sense. Thanks for that. Second question, you've obviously inked some new AI partnerships and several prior partnerships you've already kicked off. What are maybe two or three of the key learnings so far from some of those partnerships, realizing it's still very early days, but just anything you can share with us would be helpful?

Yeah, yeah, sure. And we're really, it's a phase in AI where we know how important this is. We were early and thoughtful about doing a lot with our product. and clearly putting it into the productivity in our company, we looked at partnerships as an opportunity to really choose the AI leaders in the ecosystem that we wanted to learn from. So with perplexity, you know, it puts us in a position to really understand what's happening with AI first search. And we've got great content to attract high intent traffic with an opportunity to drive hotel and experiences bookings. And the learning is how we optimize in an LLM based SEO environment. to really reimagine our user experience and to think about how we're going to drive value through a kind of combination across licensing, incremental traffic, putting our products in front of these high intent travelers, and then ultimately direct booking revenue. With OpenAI, we're experimenting there with OpenAI Operator. We really want to understand and set the foundation for what agentic AI could become and how it may redefine trip planning and booking. It's very early there. The consumer is still kind of looking at it and studying and trying to understand it. But we're deepening our partnership there. And we think a traffic-based value exchange with some licensing involved allows us not only to begin to monetize, but then to learn how to adapt our products for these opportunities for the future and what the behavior of these audiences are going to be. And by the way, some of these audiences can be higher intent than average. You know, Alexa with Amazon was really about elevating the TripAdvisor brand and content in a voice-activated AI interface. So we really want to understand where multimodal is going around voice and images and ultimately video. And we want to understand the cross-platform user experience and how our content can be leveraged. And then I mentioned Microsoft Azure. You know, here we're serving as an anchor data provider in a paid AI marketplace. And that allows us to learn about how our data is valued And by whom? And for what? And I think that will put us in a tremendous advantage. It's all about laying the foundation so that when we see things that are working, we can move very quickly to create value where it gets created at.

Great, thank you.

One moment for your next question. The next question comes from the line of Jed Kelly of Oppenheimer. Jed, please go ahead.

Hey, great. Thanks for taking my question. Just going back to Viator and given everything you're seeing in the U.S., any shift on how you're thinking about marketing Viator this year given, you know, what's going on in the U.S. and some of the competition? And then I appreciate the commentary on completing the Liberty Trip Advisor merger. Can you give us what we should be expecting for a diluted share count at year end if you can? Thank you.

Yeah, Jed, I'll take the first one on the marketing shift. So I would say we're really not thinking about different ways of how we're approaching marketing at Vitor other than what we've been talking about for some time, right, which is we're going to continue to utilize the paid channels effectively. go where converting demand is and convert that as best as we possibly can. Give that user a great experience, great choice, get them to book, and then give them really, really great customer service and follow back up with them. And then once we have them have an experience, continue to utilize that relationship going forward, hence the repeat business. So that is in the most basic way that the marketing flywheel we're working. A key part of that will be, as I said before, the marketing, I mean a product-led piece of that. So in that flywheel, talking about how we increase conversion and how we get that user to come on and convert more effectively.

The only thing I would add to that, Jed, is that with a focus on marketing efficiency, we do think cross-channel. We are being very careful as we measure and think about what will drive our unit economics to make sure that our performance marketing is as effective as it can be. And we're also looking at testing how we can optimize the role of each brand in our marketing approach and how we work across those two brands to drive meaningful incremental uplift for the group which I think is really exciting and we'll probably have an opportunity to say more ahead. And so, you know, that probably comes along with, you know, thinking about where our brand spend goes and adjusting that. But it just leads to, you know, better marketing efficiency, better coordination, and I think better outcomes.

And Jed, just on the technical point on shares, so we have prior to the transaction about 142 million shares outstanding. We're retiring... Again, as I said, the 23.8, so we'll have about 118 million shares outstanding post-transaction. Thank you.

Yep. One moment for your next question. The next question comes from the line of Kevin Copelman of TD Cowan. Kevin, please go ahead.

Thanks a lot. I just had a follow-up on Jed's question, really. Could you dig in a little bit more on the Viator marketing in Q1? Because it was flat year over year, and that was pretty surprising. And can you confirm if the third-party rev share is in the marketing line? I think it is. But, yeah, just any more color on how you were able to keep that flat year over year given – Uh, I think 15% volume growth. Thanks.

Yeah. You know, it just, it just reflects continued progression in that. Um, and as we think about, uh, different mixes of that, uh, Kevin, um, I would say last year, we're probably, we were lapping a larger brand campaign, uh, in Q1 of last year that we were a bit more modest on this year. And so that was a big driver of that leverage. But it just goes to show, it comes back to what we just talked about, efficiency through our paid channels continues to be very consistent and will be our primary way that we attract, acquire, and get people to come back to us directly would be our main flywheel for that.

And could you confirm if the third-party rev share is in that marketing line?

No. Well... It's a great question. There are many different relationships in third party. It's not just like the OTAs. Again, we have affiliates. We have white label. We have travel agents. The majority of that would not be through that marketing because in certain cases, it's more like a supply plus relationship. So it's really not reflected in that.

Okay. So it would be in cost of revenue in the other cases for the most part. It just netted out of revenue, that's right.

Okay, like a contra revenue. Not necessarily contra revenue, just kind of, yeah, exactly.

It sounds like that wasn't really the, I'm sorry. Go ahead, Kev. It sounds like that wasn't really a big driver year over year necessarily, though, of change.

In efficiency, no, that's correct. Okay, great. Thank you very much. If that was the answer to the question, that's it. That was not a driver of efficiency. Thank you very much. Yeah, for sure.

One moment for your next question. The next question comes from the line of Tom White of DA Davidson and Co. Tom, please go ahead.

Great. Thanks for taking my question. Maybe just one follow-up on the earlier AI one. I guess my thanks for the color on the initial partnerships. Can you maybe talk a little bit about the biggest opportunities you see to incorporate AI into your own consumer-facing experiences or just kind of the consumer experience on the site? Less interested about like sort of efficiencies, you know, on kind of the cost-for-operation side, but just, you know, ways to maybe help drive better retention, loyalty, direct traffic potentially. Thanks.

Yeah, I mean, we are really, thank you, we're focused on creating an AI-first product execution culture, which is all about conversion, repeat, and loyalty. And it's happening all across the business. At Viator, they're very focused on strengthening the personalized recommendations and getting the sort right to drive conversion. They're focused on improving B2B product listing. They're using it at the world-class customer service for booking assist and post-booking communications. It's also being used in marketing to enhance creative and their performance bidding. We talked a lot about TripAdvisor and AI driving engagement and increasingly early monetization gains that we plan to scale. So we started with GenAI trip planning and the sort of personalized trip planning recommendations. That is getting better and better and better and growing very rapidly, albeit on a small base. And it's going to become highly integrated into the UX, We brought on an AI travel assistant on top of that. You could see how those could come together and even in an agentic way. And then, of course, we've been using Gen-I across all categories to make sure that people can engage with our review summaries. And over time, what that'll mean is the most personalized recommendation platform available anywhere because the size of our audience and all that data that we have and the size of our content asset and how relevant it is and You can imagine how that we know more about travelers than anybody else, and we're able to make it feel magical the way that we understand what you're looking for. It's very early days on that, but we're really excited how that's progressing. And the fork, of course, is using AI as well in a continuous innovation agenda. On the B2C side, it's all about discovery and matching and conversion. On the B2B side, they're using agentic AI to expand their restaurant selection and book off platform. and, of course, to drive service quality and efficiency in CF. So it's really being used everywhere, and the exciting part is I think our culture is shifting. The people in our company are excited about this. We've given them all the tools to experiment every day, and I think this is just getting started, and we will see real tailwinds from that work.

Thank you.

One moment for your last question. The last question comes from the line of John Colantoni of Jefferies. John, please go ahead.

Good morning. This is Chris on for John. Thanks for taking my question. I wanted to ask about take rate at Viator. It seems like revenue and gross bookings have been growing kind of roughly in line over the last few quarters, but prior to that, there was some noticeable take rate expansion. So I know there might be some holiday timing factors in there. Can you give us a sense for what's going on with underlying take rate and where you think it could ultimately go over time? And then secondly, are there any implications to take rate from growing third-party mix?

Yeah. Yeah. Hey, Chris, great question. So our take rate, again, the applied take rate that you may see, you know, revenue divided by gross bookings, obviously that's going to fluctuate. It's going to be based on, it's going to be very different because of timing. and the book-to-travel window, as you're well aware. I would say, and which is a real question, underlying take rates have been very stable, right? And they, on average, have been in the mid-20s percent, as we've said before, which we believe is reflective of the high value that we provide to our suppliers, the demand that we give them, and really just being good partners with that. A lot of the take rate, again, we've talked about this from time to time, has been driven by our partners signing up for certain programs to pay higher take rates so that they get more privileged advertising in our services. So again, demonstrating the value of that. So we're very happy with where take rates are today. We're always trying to strike the right balance of value we provide for our operators. We don't necessarily see, expect, or need take rates to continue to go higher. Again, we are really focused on the right value for our operators and giving them just incredible service and value. And so that's what we're focused on. When we think about 3P, again, third party is many things. It's travel agents, it's OTAs, it's white label. OTAs have been driving the growth within 3P. Those do carry a lower implied take rate. And that is still reflective in our overall take rates in the mid-20s. So that is within there. But again, a third party, highly incremental, and very profitable from an EBITDA margin perspective, which is the key.

Thanks very much.

Yeah, thanks, Chris.

This concludes the question and answer session. I would now like to turn it back to Matt Goldberg for closing remarks.

Thanks, everyone, for joining us on this morning's call. We're really excited about our plans for the year, and I just want to take a minute to thank all of our teams for their relentless focus and execution. It really matters, and it's making a difference. We've made significant progress in our segment strategies and on our group-wide collaboration, and we're looking forward to the opportunities ahead as we continue to build out our position across experiences and travel, and we'll see you at the next update. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.