The operator introduces the Expedia Group Q2 2024 Financial Results Teleconference and turns the call over to Senior Vice President, Harshit Vaish. He is joined by CEO Ariane Gorin and CFO Julie Whalen. The call will include references to non-GAAP measures and forward-looking statements. Ariane has been CEO for a quarter and has been focusing on executing growth in the consumer business, refining the long-term strategy, and ensuring the right leadership team is in place.

In the second quarter, the company saw progress in delivering better experiences for travelers and value for partners. Room nights, gross bookings, and revenue all grew, driven by improvements in Vrbo and strength in Brand Expedia, advertising, and B2B segments. Costs were also well-controlled. While the U.S. saw mid-single digit growth in room nights, Europe and the rest of the world saw stronger demand. However, there was pricing pressure for air and car. In the Consumer business, gross bookings grew by 1%, with a focus on improving traffic, conversion rates, attach rates, and marketing efficiency. Traffic growth and conversion rates improved, and there was an increase in bookings through apps. Multi-item trips also saw a 9% increase.

In this paragraph, the speaker discusses the importance of offering multiple products to travelers and the success of their Brand Expedia and Vrbo businesses. They mention the marketing leverage in the second quarter and the recovery of Vrbo through increased marketing spend and product improvements. The One Key loyalty program has also been a source of new travelers for Vrbo, and the speaker is pleased with its first year anniversary in the U.S. They also mention the launch of a co-branded credit card and the expansion of One Key to the U.K., but note that further international rollout will be paused.

Expedia is focusing on tailoring their value proposition for international markets where they have limited presence, in order to minimize disruption to Hotels.com. Loyalty members on their legacy programs continue to benefit from improved member discounts. In terms of international expansion, they have launched in UAE and Saudi Arabia with positive results. In the B2B segment, bookings grew 20% with a significant portion coming from existing partners. They have also improved their supply offerings, including a new partnership with Ryanair, and are investing in tools to help supply partners attract more travelers.

The speaker discusses the company's focus on improving the performance of their consumer business and investing in technology to strengthen their brands. They also mention continued growth in their B2B segment and cost discipline measures being implemented. The speaker expresses satisfaction with their second quarter results and thanks their employees for their hard work in achieving their goals. They then hand over to Julie to discuss the financial results and guidance.

In the second quarter, the company saw a 6% increase in total gross bookings, driven by a strong performance in the hotel and Vrbo businesses. Revenue also grew by 6%, with the B2B, Brand Expedia, and advertising businesses leading the way. However, revenue margin remained flat due to lower gross bookings in the first quarter, the shift of Easter stays, and pricing actions. Cost of sales decreased by 11%, resulting in 190 basis points of leverage. Direct sales and marketing expenses increased by 14%, primarily due to higher commissions and increased marketing spend to drive growth in Vrbo and international markets.

The company mentions that commissions paid to their B2B partners are more expensive but provide guaranteed and immediate returns. They also reinvested in their Vrbo business and international markets to drive growth. Overhead expenses decreased by 3% due to cost-cutting measures. EBITDA for the second quarter was $786 million, up 5% from last year, and EBIT margin expanded by 20 basis points. The first half EBITDA margins exceeded expectations due to strong expense management.

The company's additional 25 basis points of expansion in EBITDA is due to stock-based compensation and slower depreciation growth. Their year-to-date free cash flow has remained strong, with a robust $4 billion, and their balance sheet shows strong liquidity of $8.7 billion. The company has reduced their debt level and continues to repurchase shares. However, they have seen a slowdown in travel demand and a decline in ADRs and air ticket prices. They are also monitoring new pricing regulations in California closely.

The company experienced weaker-than-expected growth in July due to various factors, leading to a revised outlook for the third quarter and full year. Gross bookings and revenue growth are expected to be in the 3% to 5% range for the third quarter, with a 100 basis point decrease in EBITDA and EBIT margins. For the full year, gross bookings are expected to be at the low end of the previously communicated range, with revenue growth at 6%. Vrbo saw growth in the second quarter and is expected to continue recovering, despite current market challenges. The company remains confident in its long-term growth opportunities. In terms of advertising revenue, the company expects to maintain its solid 20% growth.

The CEO of Vrbo discusses the company's plans for growth and the current challenges it is facing due to the pandemic. They expect to drive the business to growth in the long term, but it is currently hard to predict due to July trends. The advertising business is performing well and there is potential for further growth. The CEO reflects on their learnings in their new role and the turnaround of Vrbo and Hotels.com. They also discuss the role of the B2B business.

Ariane Gorin, CEO of Expedia, discusses the challenges of transitioning B2B brands like Vrbo and Hotels.com onto a common platform. While this has allowed for faster innovation, it has also led to the loss of unique features and advantages for these brands. Gorin acknowledges the need for continued work to regain these differentiators and is focused on utilizing the platform's capabilities to customize and improve the B2B brands.

The speaker discusses the potential benefits for Hotels.com in the international market, noting that the brand has strong recognition in certain regions. They also mention the B2B business and its potential for growth, highlighting the importance of supply, technology, sales, and partnerships. The speaker acknowledges the competitive landscape and the need for innovation to stay ahead. In terms of margin expansion, the speaker notes the challenges posed by marketing priorities and ADR pressures, but does not provide specific strategies for addressing these challenges. They also address a question about the interplay between B2B and B2C businesses, noting that there is potential for cannibalization but also opportunities for growth.

In response to a question about managing the two businesses in the environment of creating super compelling travel rewards programs, Expedia executives discussed their focus on driving efficiencies and cost savings, as well as making investments in marketing and international markets to reinvigorate the business. They acknowledged that while this may impact short-term leverage, they are not currently guiding to 2025.

The growth throughout the quarter was steady, but there was a step down in July.

In this paragraph, the speakers discuss the second quarter performance of the company, with Julie Whalen addressing a question about a step down in July across geos and Ariane Gorin discussing the confidence in the company's transformation work following the completion of the tech platform migration. Whalen explains that there was noise in the P&L in July, mostly in the U.S., while Gorin highlights the capabilities unlocked by the replatforming, such as increased testing and the ability to roll out e-commerce basics across all brands.

The company is now focusing on building brand-specific features and configurations, after spending the last few years rebuilding foundations and migrating. There has been a slight deceleration in B2B growth due to global demand normalizing, but the business is still strong and has a lot of potential for growth. The current macro environment is impacting the business, but the underlying health is strong.

The company has observed a slight shortening of booking windows in July for both the B2C hotel business and Vrbo. This is the first time they have seen this in a while. The B2B business has been affected by a normalization of growth in Asia, while the US part of the business saw a slowdown in July. The company has revised its annual guidance to 6% revenue growth and 4% bookings growth, with weakening airfare and ADRs. They do not provide guidance at a line item level.

The speaker mentions that the numbers presented for the full year assume certain factors, but there will be an impact on the lodging business. They are not providing guidance on this at the moment. They have taken action on the restructuring announced earlier this year and are almost through with it. There may be some softness in ADR and nights activity due to the current macro environment. They are managing B2C advertising expenses in the second half given the current situation.

The company is seeing a decrease in nights booked due to a softening in travel demand. They are managing to maintain EBITDA margins in line with last year while investing in Vrbo international markets. They are closely monitoring macro trends and adjusting their marketing strategies to be most effective. They are also reviewing their marketing spend to ensure it is being used efficiently.

The speaker discusses the importance of understanding the returns on marketing spend, especially in a volatile environment. They mention the upcoming EXPLORE Conference where they will discuss their advertising and media plans. They also mention the potential for growth in the advertising business, particularly in the upper funnel and post-booking stages, as well as expanding the number of partners using their advertising tools. They also briefly touch on the potential impact of the One Key expansion to the U.K. on Hotels.com in the second half of the year.

The speaker discusses potential growth opportunities for the company, such as sponsored listings and new products. They also mention making it easier for advertisers to use their services and introducing video into their ads. The rollout of One Key in the U.K. is not expected to have a significant impact on the company. The Hotels.com 10 for 1 program will remain the same in markets outside of the U.S. and U.K.

The company is currently working on figuring out the path forward for their loyalty programs. This does not affect their supply partners, as they can still participate in member deals and reach Hotels.com rewards members. One Key has not been rolled out to the B2B business, and the company is considering rolling it out to advertising partners. The company is taking time to think about the value proposition for their loyalty programs in countries with only one big brand. In the third quarter, the company has not factored in any potential recovery in August and September. They have also implemented pricing reductions, but it is unclear how this has affected conversion rates. The company may need to make further pricing adjustments due to trade down.

The company has run various scenarios and used new data from July to predict where the quarter will land. They did not assume any step-up in September. They have implemented pricing actions that are driving conversion and plan to continue with them. The company is not sharing details about the pipeline for B2B deals, but they are thoughtful about which deals to bid for. They have a large brand campaign planned for the fourth quarter, but if the current softness continues, they may adjust their marketing strategy.

The company has a strong team and is focused on both finding new partners and growing with existing ones. They are investing in marketing for Vrbo and expect to continue doing so, with a 20% growth in room nights for Brand Expedia being a key highlight. The company is seeing benefits from their advertising efforts and is focused on long-term growth.

Ariane Gorin, CEO of Expedia, discusses the company's recent quarter and highlights the success of their Brand Expedia brand. She credits their strong marketing efforts and innovative technology for the brand's success and expresses optimism for future growth. Despite a potentially volatile environment, Gorin believes the company has a strong foundation to continue driving profitable growth.

The author wishes the reader a nice day.

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