The paragraph introduces the Expedia Group Q4 2023 Financial Results Teleconference and the speakers for the call, including SVP Harshit Vaish, CEO Peter Kern, and CFO Julie Whalen. It mentions that the call will include references to non-GAAP measures and forward-looking statements, and provides information on where to find the earnings release and SEC filings. It also mentions the news that CEO Peter Kern will be stepping down in May and passing the role to Ariane Gorin. Kern acknowledges the challenges of leading the company during the COVID pandemic when travel was at a standstill.

The company faced financial struggles and uncertainty during the COVID pandemic, but the speaker remained optimistic and saw it as an opportunity for transformation. They are proud of the team's ability to push through and achieve their goals. The speaker will be leaving the company soon, but will ensure a smooth transition to Arianne, who is seen as a capable leader with a successful track record at Expedia Group.

Despite a year of change, the company met its guidance and had a strong fourth quarter performance. There was some softness in gross bookings due to a reduction in average ticket prices, but the company continues to improve its AIR product and sees growth opportunities. The lodging business had a record quarter, but Vrbo suffered expected conversion degradation. However, the company is now focusing on marketing and has a new brand strategy in place.

In 2023, Vrbo has made significant improvements, including the launch of One Key, migration to Vrbo, and integration of machine learning and AI. They have also streamlined their investments and eliminated dependencies on various agencies. The business has shifted to focus on acquiring and retaining high-value customers. On the tech side, they have consolidated systems and data profiles, reducing developer tools and optimizing their IT footprint. All brands are now on a single front-end stack with a unified test-to-learn platform for rapid testing and feature launch.

The company has undergone significant technological changes that have allowed them to greatly increase their test-and-learn capabilities and accelerate feature deployment. These changes have also led to impressive financial performance, with record levels of bookings and revenue and the highest EBITDA margins in over a decade. The company has also used their strong free cash flow to buy back stock and reduce their share count to 2015 levels.

The company has closed many office locations and reduced its workforce, with a focus on increasing the percentage of employees working in product and tech. They acknowledge the importance of learning and adapting, but believe they can afford to make more mistakes as they continue to innovate and lead the industry. In 2024, they expect travel demand to remain strong, but growth rates to decelerate and prices to potentially soften. However, they are well-positioned to gain market share and grow their top and bottom line, as they can focus on executing their strategy without distractions.

The company has five strategic priorities, including focusing on acquiring and retaining high ROI travelers, increasing share of wallet with travelers and partners, and driving cross-brand and cross-product engagement through One Key. They will also be scaling One Key internationally and expect to see an increase in app members. The company believes that with better customer targeting, AI-driven products, and One Key, they will continue to build momentum and value in their member roles.

The company plans to capture more of their consumers' spending by expanding their lines of business and increasing their global market presence. They also aim to solidify their leadership in the B2B segment and focus on efficiency and effectiveness in their operations.

The company has significantly improved its EBITDA margins in the past decade and believes there is still room for further growth through increased efficiency and leveraging technology. The company's transformation has also improved customer service operations and positioned it to out-innovate competitors and deliver the best experiences for customers and shareholders. The current CEO is grateful for the support of the team, board, and shareholders, and confident in the new CEO taking over in May.

The writer has known Peter since joining Expedia Group's board in 2019 and praises him for his leadership during the pandemic and driving the company's transformation. Peter will continue to support the company as Vice Chairman while Ariane takes over as CEO. The company's fourth quarter results show double-digit growth in revenue and EBITDA, resulting in record levels for the full year. The company also saw growth in total gross bookings, lodging bookings, and revenue, with margin expansion and marketing leverage.

The company's B2B business had a successful year with a 33% growth in both top and bottom line. This led to meeting their full year guidance of double digit top line growth with margin expansion. In the fourth quarter, total gross bookings were $21.7 billion, up 6% from last year. This was driven by growth in lodging and hotel bookings, with the company gaining or maintaining share in key markets. Revenue for the quarter was the highest on record at $2.9 billion, with a 10% growth from last year. This was primarily driven by lodging, which grew 14%. The company also saw an increase in revenue margin and a decrease in cost of sales, resulting in leverage as a percentage of revenue.

The company's ongoing efforts to improve customer experience and increase automation have resulted in lower costs and increased efficiencies. Direct sales and marketing expenses have increased due to commissions paid to B2B partners, but this has been offset by flat marketing spend in the B2C business. Overhead expenses have also increased due to investments in product and technology teams. The company delivered record EBITDA and strong free cash flow, with both metrics showing sequential growth. However, free cash flow was impacted by changes in working capital, which has since normalized.

In the previous quarter, the company had strong free cash flow levels, allowing them to complete a large share repurchase. They have a strong balance sheet with plenty of liquidity and a low debt level. They expect moderate market growth in 2024, but anticipate another strong year with growth in line with 2023. They plan to optimize their cost structure and drive operating efficiencies and cost savings, resulting in reduced CapEx levels. They also expect to incur one-time expenses of $80 million to $100 million in the first quarter for streamlining their cost structure.

The company is expecting to share more details about their global expansion efforts and marketing plans this quarter. They anticipate some short-term pressure on marketing efficiency due to their investment in international growth. However, they still expect to drive overall marketing leverage and deliver record EBITDA and margin expansion. They also plan to use their strong free cash flow to maximize shareholder returns through share repurchases. The company's stock price is undervalued and they plan to continue buying back shares. The first quarter of 2024 may be challenging due to tough comps and pressure in the air and Vrbo brands.

The company expects low to mid-single digit growth in gross bookings and mid-single digit growth in revenue for the first quarter. They also anticipate some margin compression and slower growth in the first quarter, but expect growth rates to increase throughout the year due to product improvements, loyalty program momentum, and growth in global markets. The company is proud of their team's execution of multi-year initiatives and believes they are well-positioned for long-term profitable growth and shareholder returns. The call was then opened for questions. The first question was from Naved Khan regarding Vrbo's recent migration and app update, as well as the progress of the One Key loyalty program and potential for improvement.

Peter Kern, CEO of Expedia, answers three questions about the company's recent transition to Vrbo and the launch of its new product, One Key. He explains that the transition to Vrbo caused a temporary decline in conversion rates and a decrease in marketing spend, but the product is now gaining traction and the company is ramping up spending again. Kern also expresses satisfaction with the progress of One Key, but notes that it is still in its early stages.

The company is seeing positive indicators such as cross shopping and increased engagement from customers with fewer than 10 stamps on Hotels.com. They are also seeing Vrbo customers earning and using their One Key rewards on other brands. However, it may take longer for these customers to come back and spend their rewards. The company is also expanding internationally, but they are not disclosing specific markets for competitive reasons. They plan to push back into strong markets and test new markets with the new product and marketing strategies. Overall, the company is optimistic about the potential impact of One Key and international expansion, but it is not solely reliant on these factors.

Peter Kern explains that his decision to step down as CEO was part of the initial plan to come in for a short period of time and get the company on track. However, the job ended up being bigger than he expected, and he and the board felt that now was a good time for him to transition out. He has built a strong team and believes they are ready to take the company forward. He will continue to work hard until his departure in May.

The speaker discusses the ongoing transformations within the company and how there is no end date for this work. They mention the progress made and how it felt like the right time for everyone. They then address a question about Vrbo and explain that they expect to continue growing and have already seen improvements in conversion rates. They also mention their ability to test and learn at a faster pace, which is changing how they operate.

The company has improved its testing capabilities and is now able to launch tests across all brands and platforms. They expect this to accelerate the growth of all brands, especially Vrbo. They also expect the cross-shopping effect of One Key to have a positive impact. The company had pulled back on spending in the past, but now plans to lean back in and improve their product and marketing. With One Key in the market and the Replatforming behind them, the company plans to offer unified product offerings and be more innovative in retaining customers and driving direct traffic. There may still be some investments to be made, but the company is confident in their growth potential.

The speaker discusses the efficiency of their investments and the benefits of their One Key product for creating customer loyalty. They mention their migration to a new unified messaging platform which allows for faster communication with customers and the ability to offer new bonuses and discounts through One Key. They also highlight the importance of modern communication methods and express excitement for the improvements and new features of their products.

Peter expresses excitement about the integration of machine learning and AI into the Vrbo product experience, which allows for a more personalized and relevant experience for customers. He believes this will make Vrbo more sticky and appealing to consumers. The questioner, Lee, congratulates Peter on his tenure and asks about the health of the alternative accommodations industry and potential pricing headwinds in popular vacation rental destinations.

Peter Kern discusses the evolving competitive landscape for Vrbo and how it has shifted in the past couple of years. He mentions that urban VR has seen continued growth, but Vrbo is still focused on its core markets. Kern also mentions the opportunity for Vrbo to share inventory with its OTA brands and the potential for growth in the housing market. He expresses confidence in Vrbo's position in the market and the progress they have made in improving the product.

The speaker believes their product will be best-in-class and they need to get back on offense after taking a pause. They are not worried about supply or losing ground to competitors because their product comes with loyalty. They plan to keep promoting their product now that it is improved. The speaker also mentions growth rates for lodging and hotels, but does not disclose the percentage of their alternative accommodation bookings. They clarify that they are aiming for double digit growth in both top and bottom line, similar to last year.

The company's guidance for growth is to remain relatively in line with this year's rates, with a focus on 9.5-10% growth in GBV and revenue. They also plan to expand margins by about 75 basis points. On the marketing front, the company is still advertising its core three brands, but is exploring ways to present them as a family of products. They are constantly working to optimize their marketing strategies. The company is also streamlining expenses, but their strategy behind this move is not specified.

The company has made conscious decisions about maintaining one brand or having multiple brands in different regions. They will only consider having multiple brands if there is strong brand affinity and other factors driving it. With the ability to offer all lines of business, they can simplify their decisions and reduce complexity. They are currently working on optimizing their communication about this. The company is also streamlining expenses and finding cost savings as they come out of the transformation phase. This will involve deprecating systems and reallocating resources in various areas of the business.

The speaker discusses two initiatives, the replatforming of the Vrbo brand and the One Key strategy, and their impact on the business. They mention that the Vrbo transition to a unified stack will allow for faster growth and improvements, but there was initially a dip in conversion. The speaker also hints at future updates and information to come.

The speaker discusses the progress of Vrbo and One Key, stating that they have gone through a difficult period but are now on track to exceed expectations. They highlight the benefits of Vrbo being integrated with the other brands and the early indicators for One Key, including increased cross-shopping and repeat bookings. However, they acknowledge that it will take time for the full potential of One Key to be realized, but they are confident in its potential to increase customer loyalty and wallet share.

Peter Kern thanks everyone for their questions and concludes the call. He mentions that there are no more questions and ends by saying they will see everyone in May. The operator confirms the call is over and the participants can now disconnect.

This summary was generated with AI and may contain some inaccuracies.