Expedia Group Inc (EXPE) — Q2 2019 Earnings Call Transcript

Good afternoon, and welcome to Expedia Group's Financial Results Conference Call for the Second Quarter Ended June 30, 2019. I'm pleased to be joined on the call today by Mark Okerstrom, Expedia Group's CEO and President; and Alan Pickerill, our CFO. The following discussion, including responses to your questions, reflects management's views as of today, July 25, 2019, only. We do not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward-looking, typically preceded by words such as we expect, we believe, we anticipate, we are optimistic or confident that or similar statements. Please refer to today's earnings release and the company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on the company's Investor Relations website at ir.expediagroup.com. And I encourage you to periodically visit our IR website for other important content, including today's earnings release. Unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense and technology and content expense excludes stock-based compensation and depreciation expense. And all comparisons on this call will be against our results for the comparable period of 2018. A reconciliation of adjusted EBITDA guidance to the closest corresponding GAAP measure is not provided because we are unable to predict the ultimate outcome of certain significant items without unreasonable efforts. These items include, but are not limited to, foreign exchange, returns on investment spending and acquisition-related or restructuring expenses. As such, the items that are excluded from our non-GAAP guidance are uncertain, depend on various factors and could have a material impact on GAAP results for the guidance period. Finally, on April 15, Expedia Group entered into a definitive agreement to acquire Liberty Expedia Holdings in an all-stock transaction. For details on the proposed transaction, we will refer you to the information in our SEC filings. The deal is currently pending approval from Liberty Expedia stockholders with the shareholder vote scheduled for tomorrow Friday, July 26. We do not plan to take any questions related to this topic on today's call. And with that, let me turn the call over to Mark.

Thanks, Michael. In Q2, we, once again, saw solid execution across the company and built on our operating momentum. Our strong results through the first half of the year are evidence of the continued progress we're making on our transformation underpinned by our key strategic themes. Being locally relevant on a global basis is guiding our focused market approach where we're seeing nice progress in international markets. We're focusing on being more customer-centric, adding features and functionality to better serve travelers. For example, we're rolling out a virtual agent platform, which is already driving improved customer satisfaction and increasing the efficiency of our customer service. This year, our efforts to increase the speed of execution and innovation have evolved into a new third strategic theme around fully leveraging the power of our global platform. We're collaborating across the company and operating more and more as one group than ever before. We're increasingly unlocking opportunities to cross-sell between brands. For example, Vrbo customers are now able to book rental cars and other products powered by Brand Expedia. Our teams are also leveraging best-in-class systems and technologies across divisions. For instance, Hotels.com recently migrated to Brand Expedia's system for collecting post-stay reviews, and is already benefiting from additional features and an improvement in content. And these are just the tip of the iceberg. We have many other opportunities to drive customer and partner-facing innovation and increase operating efficiency by better leveraging the scale of our platform across Expedia Group. To that end, we've recently begun a design process with the goal of realigning certain teams across the company to enable them to better execute on this platform approach. All of these efforts are squarely aimed at driving better customer and partner experiences as well as stronger long-term growth and value creation. Our continued progress on these key strategic themes contributed to healthy financial performance in Q2 with top line growth accelerating and adjusted EBITDA increasing 23% year-over-year. Our Core OTA segment continues to lead the way as we see positive results from the playbook we're executing to drive our lodging business. Core OTA room night growth was a healthy 12% in the quarter. We're confident that continuing to push targeted supply acquisition along with focusing on locally relevant content, product innovation and strategic marketing investments will lead to healthy top and bottom line results across our Core OTA business going forward. A key tenet of our playbook is our supply acquisition effort where we continue to see nice results. Excluding Vrbo listings, we added over 40,000 properties to our core lodging platform for the sixth consecutive quarter and expect that elevated pace to continue as we move through the year. Including now approximately 570,000 integrated Vrbo listings, we ended the quarter with nearly 1.3 million total properties on our core lodging platform. Vrbo eclipsed 2 million online bookable listings in the second quarter, and over 1.3 million of those are now instantly bookable. The team continues to navigate the brand and platform transition we discussed last quarter. And although gross bookings growth remained modest, we saw growth trends improve throughout the quarter. While we still have a lot of work to do, we continue to see an attractive long-term growth opportunity, both at Vrbo and across Expedia Group in the alternative accommodation space. Egencia delivered healthy profits in Q2 with adjusted EBITDA increasing 24%. The Egencia team continues to be disciplined in cost management while enhancing its product offering with new machine learning-driven features and increasingly leveraging the Expedia Group platform capabilities to provide a better customer experience. As we further differentiate our product, we're confident we can deliver strong growth and share gains over the long term in the managed corporate travel segment. Trivago posted another quarter of healthy profitability, while revenue decline slowed as its marketplace continued to stabilize and trivago started to lap last year's marketing optimization effort. With comps largely normalized heading into the second half of the year, the team is making targeted marketing investments to drive growth. In addition, as trivago highlighted yesterday, it continues to evolve its product and test new features aimed at enhancing its marketplace, which should provide a benefit over time. Overall, we expect trivago to return to revenue growth in the second half of the year, and they remain on track to deliver healthy profits for the full year. In closing, we're making nice strides in transforming the company as we push forward on our key strategic priorities. Our operating momentum and healthy financial results throughout 2018 and now into the first half of this year are evidence of our enormous potential. While we're still early in our journey as the world's travel platform, we are confident that continuing to rigorously execute on our plan will lead to sustained growth for many years to come. With that, I'll turn over to Alan.

Thank you, Mark. We are pleased with our performance in Q2 with both gross bookings and revenue increasing 9%. Excluding the negative foreign currency impact to each, gross bookings grew 11% and revenue was up 12%. Both total lodging revenue and stayed room nights also grew at solid 12% in the quarter. We continue to see nice momentum in our Core OTA segment. The healthy room night growth Mark mentioned contributed to an acceleration in revenue growth and an 11% increase in adjusted EBITDA despite tougher comps as we started to lap the marketing optimization benefits from last year. Our approach to marketing remains balanced and disciplined, strategically investing in key marketing channels to drive growth, particularly, as we expand our supply base and attract new customers. That balanced approach has our Core OTA segment well positioned to deliver solid growth for the full year 2019. Vrbo gross bookings increased 2% in the quarter as we continued to work through the brand and platform changes that we have discussed previously. Stayed room nights grew 8% in Q2 and we expect continued modest room night growth in the back half of the year. Revenue at Vrbo was up 17% year-over-year due to approximately 25% growth in transaction revenue, while the decline in subscription revenue moderated to 7%. Transaction revenue benefited from continued optimization of our fees and further mix shift of transactions to pay per booking listings. Adjusted EBITDA increased 8% in the quarter as we invested behind the Vrbo brand across marketing channels. We plan to continue investing in the business as we navigate this transition period to position Vrbo to capitalize on the significant opportunity in alternative accommodations longer-term. Total advertising and media revenue was up 4% in Q2 and increased 8%, excluding a negative foreign currency impact. Media Solutions posted another quarter of over 20% growth, while the revenue decline at trivago moderated as the comps began to ease. In our Air business, ticket volume increased 10% benefiting from new enterprise partnerships at Expedia Partner Solutions that launched in late 2018 along with growth at Brand Expedia. Revenue per ticket declined 7% due to a reclassification of certain fees to other revenue, in addition to a negative FX impact and a shift in product mix. As a result, total air revenue was up 2% in the quarter. Turning to expenses. We saw nice leverage on overall costs, resulting in almost 200 basis points of adjusted EBITDA margin expansion in the quarter. While total expense growth was above Q1 levels, it was in line with our expectations as we continue to execute on the same formula: combining strategic marketing investments with disciplined overhead cost management to deliver attractive profit growth. We saw nice leverage on cost of revenue, which grew 6% in Q2, primarily due to higher cloud expenses. We continue to expect cost of revenue growth to accelerate in the back half of the year, but we now expect cost of revenue to grow approximately in line with revenue for the full year. Total selling and marketing expense increased 7% in the second quarter. Similar to last quarter, trivago accounted for the leverage with declines in both direct and indirect selling and marketing. Excluding trivago, direct selling and marketing increased 15% due to higher brand investments and performance marketing costs in part to support our international expansion efforts along with partner commissions related to the growth at Expedia Partner Solutions. As I mentioned earlier, we started to lap the marketing optimization benefits we saw last year, which were most notable in the second and third quarters creating tougher comps and direct selling and marketing this year. Technology and content expenses were up 9% year-over-year driven primarily by increased headcount as we invest in product and platform enhancements across the business. General and administrative costs grew 7%. As expected, cost growth was above Q1 levels mainly due to more difficult comps and higher growth in professional fees in Q2. We remain on track to see nice leverage on general and administrative costs in 2019. In total, overhead expenses increased 4% as we continued to take a disciplined approach to managing these costs. As Mark highlighted earlier, we are increasingly operating as a platform company by leveraging technology to drive automation and collaborating to reduce duplicative activities. We're starting to see some early benefits and expect additional efficiency gains in 2020 and beyond. Importantly, we expect our platform approach to spur further innovation and contribute to healthy revenue trends over time. Moving down the P&L, we also saw a nice leverage below the line. Depreciation expenses increased just 4% as we continued to benefit from lower data center CapEx. Net interest expense declined year-over-year and our adjusted tax rate was 22% in Q2. These factors, taken together with our strong operational performance, led to very healthy adjusted EPS growth of 29%. In terms of capital allocation, our overall approach is the same as it's been for several years: balancing opportunistic M&A with share repurchases and our dividend. Looking ahead, the strong organic growth potential for our business and declining capital intensity leave us well positioned to deliver attractive free cash flow over the next few years. As demonstrated last year and based on the landscape we see today, we currently have an incremental bias toward deploying a greater portion of our excess capital to share repurchases in the coming years. Also note, we remain on track to close Liberty Expedia acquisition pending their shareholder vote tomorrow, which will reduce our share count by 3.1 million shares. Turning to our financial expectations for the full year. We are increasing the low end of our guidance range and now expect consolidated adjusted EBITDA growth of 12% to 15% in 2019. Looking at the back half of the year, we expect modest adjusted EBITDA growth in the third quarter due to the expected retroactive impact of the French digital services tax as well as tougher comps at trivago and from the ramp-up of our marketing optimization efforts last year. We then expect adjusted EBITDA growth to reaccelerate in the fourth quarter. One other item to note, we anticipate our adjusted tax rate will be a bit higher in the second half of the year than it was in Q2. Overall, the formula that led to our strong performance in the first half, healthy revenue growth combined with strategic marketing investments and disciplined overhead cost management, is the same formula we plan to execute going forward. And we believe continuing to progress on our key strategic initiatives, which are all aimed directly at driving that same growth algorithm, will position us to deliver healthy growth in 2019 and beyond. Operator, we're ready for our first question.

I had a question about the advertising ROI environment. Can you give us more color on ad ROI trends? As it looks like your room nights accelerated, but your ad spend also accelerated above that. So how much was Expedia kind of getting more aggressive versus changes to the environment or just seeing more volume?

Kevin, I think it's been largely consistent with the trends that we've seen over the course of the last few quarters. The same really factors exist in our business as they have in the past, which is we continue to optimize our marketing spend, making sure that we're getting the incremental bookings and that we're being very disciplined around the rest of the whole marketing piece. But as we expand internationally, ultimately, you end up with countries that you're expanding into that have a greater proportion of their mix being in more performance channels. And as those markets are growing faster than domestic, ultimately, they can result in the acceleration of sales and marketing growth. And certainly, that's something you could expect to see from us over time. But again, the formula here is that you build a position in a new market over time, you start getting more and more loyal repeat customers. And each of these markets, which may be from the start less efficient than a mature market like the U.S., actually becomes more and more efficient over time as you build your brand position. So the overall environment is largely similar and really it's really a geographic mix story for us.

And Kevin, I would just add some of my commentary around the direct marketing spend last year. Q2 and Q3 are particularly tough comps there. Those were quarters when we were really getting after the overall marketing optimization. And there was quite a lot of goodness there in terms of leverage, and we're comping over that. So that's part of the relationship between direct selling and marketing in this Q2 if you're comparing it to what you saw in Q1.

Two quick ones. So first one on Vrbo. As you navigate through the challenges in the business and then as you move toward brand integration efforts that you talked about in the last quarter under the Vrbo brand internationally, how should we think about the magnitude and timing of the marketing investments that you're required to make this push internationally? It doesn't sound like there are incremental investments in 2019. Is that more a 2020 event? Or should we expect a more gradual investment? And then second one on core. The 12% growth was a really good improvement from last quarter. There was obviously some noise with the Easter timing benefit, et cetera. But with the international business particularly showing good results from all the initiatives that are put in place over the past few quarters, do you think the core business is on track to kind of deliver improving growth continuously over the back half?

Thanks, Deepak. I'll take the first one and then I'll turn it over to Alan for the second one. The plan for Vrbo around international expansion is really we'll be looking through the back half of this year and then into 2020 to really start to do the bulk of the brand consolidation works internationally. As we do that, we will start to put more money against the Vrbo brand. But again, as we do with the rest of the business, I mean, we're really looking to take a balanced approach here. We do it at Vrbo, we do it across the Core OTA business. I would also say that our international expansion efforts and our urban expansion efforts, as it relates to alternative accommodations, are in part Vrbo, but they are also part of the Brand Expedia and Hotels.com story. So Brand Expedia and Hotels.com have or are building meaningful positions in places outside of the U.S., places like Europe, places like Asia, Latin America, where Vrbo doesn't have a presence. A lot of that demand is real quality urban demand. But they've also got great demand in resort and other destinations. So as we build the Vrbo brand and as we start to add international and urban inventory over the course of the next 18 to 24 months, the story is built Vrbo but also drive demand into those new partners as they come on the platform through the rest of the Core OTA brand. And that will help essentially us do this in the most efficient and effective way.

Yes. And Deepak, on your second question. I mean, I think the first answer really is that we're quite pleased with the execution in the Core OTA business. We're happy with that 12% room night growth that we saw there in the second quarter. We do have significant efforts, as you know, underway to grow the business internationally. And we think that we are seeing good execution there and benefits from that. As far as how to think about the trajectory into the back half of the year, I would say that we have many initiatives underway to help continue to deliver healthy room night growth as well as acceleration where we can find it. But I wouldn't necessarily count on vast acceleration in the back half of the year. We're comfortable with where we are. But the long-term story is that we're looking to drive as faster room night growth as we can.

Two questions. One on Vrbo and one on international. On Vrbo, I think Mark, you talked about some improvement during the quarter in the booking growth trajectory. Can you shed some light on it? And also in the face of these SEO headwinds and the platform changes, when do you expect to start to see sort of return to a more normalized growth trend in the Vrbo business? And then on the international front, if I look at the international room nights, there was a nice pickup. Obviously, Easter probably contributed to that. But even ex that, it looks really strong. What are the factors contributing to that other than Easter, I would ask?

Great. So on Vrbo, we did see some acceleration in the quarter sequentially from month to month. But I would say, listen, the overall story for Vrbo is that if you adjust for Easter and a few other factors, the Q1 to Q2 story was broadly consistent. The team is working hard on all of the tactical improvements that they need to make to get predominantly the SEO volume back on track in addition to continuing to drive essentially best-in-class marketing efforts and delivering amazing products to both their customers on the travelers' side and then also their hosts. And the team has come a very, very long way on that front. So we're comfortable with the activity the team is doing. How that plays out in terms of growth rates, we're kind of expecting more of the same for the next couple of quarters. We're going to try to do our best, and the teams are doing their best to do better. But we're probably into 2020 before we see a meaningful pickup. And I will tell you again that underneath all of this is very healthy growth we're seeing at the Vrbo brand itself. This really is a flanker brand story, and underneath is kernel of a real healthy business.

Yes. And then as far as the international room nights, I think that you hit the nail on the head, Naved. The execution is good. We're seeing progress internationally in our focus market. We've talked extensively about all the efforts underway to close supply gaps to make sure we've got locally relevant content across the board. And there's still a ton of work to do around the world, but we do think that we're starting to see some good results there. Easter was a contributing factor as well and plays a decent role, especially in Europe. But overall, quite pleased with the execution there.

I wanted to double click on Mark's earlier comments on the third strategic theme, leveraging the global platform. You've had many of these brands for a while. Could you talk more about why you're focusing on collaboration now? And any investment or conversely savings that you expect to realize around this? Conceptually, it seems like this could be a net benefit to conversion rates, marketing ROI and your local relevance initiatives.

Yes. Listen, we're super encouraged by what we're doing. And the real goal of this is that as we look across the company, we've just built some incredible technologies that exist throughout, some incredible capabilities on the marketing side. And aside from the fact that they exist, which is great, there is this huge opportunity for us to actually leverage that across the business. And historically, how we would manage this business was largely in essentially brand silos. And our belief is that by leveraging actually not just best practices, but really sharing the technologies across our businesses, it will actually be able to do things that none of us could do independently that make the product better for our customers and do so in a more efficient way. And the great thing is if you take, for example, the Hotels.com post-stay review example that I mentioned, where they're using Brand Expedia's post-stay review platform, they got essentially a better product, better content, more features. And the team at Hotels.com that was working on that actually was able to go and work on something else that actually our customers can see as well. So it's one of these things where as long as you do it, as long as you do it right, you set things up the right way organizationally, you can get the sort of the magic of more effective and more efficient. I think for now, as it relates to brand strategy, we're happy with the brands that we have and what we're not saying is that we're doing some big consolidation effort. But what we're saying is that a lot of our brands have very unique value propositions. And there are ways where we can cross-sell amongst them and treat each other like essentially partners almost like third parties would do as opposed to being super focused on just competing with one another. And we think that is unlocking opportunities like the example I mentioned with respect to Vrbo actually putting Brand Expedia offerings available for Vrbo customers. So again, it's early in all of this, but we're very optimistic about what we can unleash across Expedia Group by doing this more effectively over time.

This is Ben Wheeler on for Mark. I was just wondering if you could please provide any commentary on the macro environment in Europe, travel landscape in terms of what you saw in Q2, maybe your outlook heading into Q3, any specific commentary on regions like the U.K. given delayed Brexit decision. And secondly, I think you mentioned in the comments about continued modest growth in room nights in the Vrbo for the rest of the year, is that relative to the 8%, meaning does that imply a deceleration or is this just kind of more of the same?

Thanks, Ben. With respect to overall macro, I think it's largely a continuation of the same. I mean we've been seeing for some time healthy RevPARs but a slowdown in RevPAR growth, healthy airline metrics but a slowdown in a lot of the key metrics and a slowdown in the growth rates. So I don't know whether we're at the top or we've sort of reached the plateau; I think the longer we go down this road, the more it feels like we might be set for a softening period. But it's nothing that we would call out right now. With respect to Europe specifically, again, it was largely a continuation of the same thing; the U.K. softness that we saw around the initial, call it, drama around Brexit really did subside a fair bit once they extended the date. I wouldn't say that it's back up to full strength. But it is better than it was. And then with respect to the rest of Europe, again, it seems relatively stable to us, and there wouldn't be much change that we would call out.

Yes. And Ben on the Vrbo outlook, as you know, we don't guide on room night growth. And so I don't want to be very specific here. I think for us, modest is not relative to any of the other quarters. It's just an objective term. And I would just encourage you to take a look at the recent trends across the business and come up with your estimates. But we're expecting modest room night growth and gross bookings growth, as Mark said, for the rest of the year until we get into 2020.

You're optimizing revenue pretty nicely for Vrbo. Your commissions are still, I guess, smaller or lighter than what your competitors are. How much more room do you think you have to optimize for commissions? And then my second question, you're sort of seeing some larger companies start to get decent investments that are optimizing around Vrbo and some of the other alternative accommodation platforms. Do you ever think about investing in some of these platforms and just trying to get closer to your supplier base, particularly, as you think about growing internationally?

Yes. So on the revenue and the take rates for Vrbo, as you know, the team has continued to test and learn to adjust and optimize as we've moved through the periods. And that continues to be part of the story here. Where we've got opportunity, we'll test that out. And if it looks like it works, then we'll go ahead and take advantage of that. But we're trying to just make sure that we've got a real reason and tested way of adjusting those. And I think the take rate on a trailing 12-month basis is about 10.7%, revenue divided by gross bookings for Vrbo. I think our understanding is that the industry envelope there looks to be kind of in the 10% to 15% range. And so we'll continue to navigate kind of in and around there.

Jed, regarding alternative accommodations and professional property management platforms, we have looked into them occasionally. However, it isn't our main focus, so we have avoided getting too involved in that area. While some of these options seem interesting, we have generally been hesitant about exclusive inventory agreements, as we question their long-term sustainability for asset owners. These arrangements often require us to invest in such players. So, have we considered this? Yes. Have we acted on it? No. That said, we are open to exploring intriguing opportunities in the future.

I understand there have been many questions regarding advertising efficiencies, but could you provide some insight into your perspective on the competitive landscape? Clearly, you have successfully maintained strong bookings growth while achieving marketing efficiencies, unlike others in the industry who have generally experienced a negative effect on bookings or revenue growth from similar initiatives. I'm curious to know your thoughts on what is driving this and how the competitive environment influences it. Additionally, in light of recent news about growth in metasearch and the hotel direct channel, how are your relationships with hotels evolving, especially concerning loyalty programs and direct booking initiatives, particularly with Google's increasing focus on travel?

Thanks, Heath. Regarding advertising efficiencies, there's a consistent story we've observed. Google is a significant advertising channel for us; they are a great partner, especially in our international expansion efforts. However, they are also a major player in the industry, striving to optimize their revenue over time. This has resulted in a decrease in SEO visibility, with traditional SEM taking up more page space and being increasingly replaced by metasearch products, which affects the overall industry landscape. Our situation is somewhat unique because we possess strong brands and properties in various regions. We can be disciplined in our marketing spending in these performance channels and understand, with good detail, what is incremental. This enables us to optimize our marketing expenditures effectively. We demonstrated this last year and continue to do so today. On the other hand, we have significant growth opportunities, as we currently lack the property coverage we could achieve globally. By increasing our property acquisition efforts and entering new auctions, we are filling the growth potential that might otherwise be limited by marketing efficiencies. While there has been some impact on our top line, it has been offset by the growth we are driving with our locally relevant and globally themed initiatives. Regarding our relationships with large chains, I believe they are strong. I trust they would agree that we both realize the unique contributions we each bring. The chains do wonderful work for the industry and customers, and we excel in areas outside their expertise. Our discussions focus on leveraging each other's strengths to create shared value rather than engaging in a competitive struggle. We initiated this dialogue a couple of years ago with our major chain partners, and it continues today, expanding to include our airline and other partners. We believe this approach is the right way forward.

Maybe two, if I can. One, there's been a lot of talk in the industry about getting more exposure to local and experiences and increasing basket size and sort of evolving the shopping experience for people on your platform. Maybe just give us a check-in on where you are on the asset front there? How you're investing against that opportunity? And then I just want to make sure I understood some of the key messages. As you look at maybe starting to reap some of the rewards from some of the investments on the hotel side from Europe, where could we expect you might make other investments globally to think about increasing supply and with it 6, 12, 18 months later possibly and hopefully increasing efficiency?

Thanks, Eric. With respect to experiences, just as a reminder, I think the last time we disclosed a number, we were north of $0.5 billion in bookings in terms of activities. The team, over the course of the last year or so, has really done a great job just reimagining the strategy there, building capabilities and starting to put us in a position where we can start to really ramp this up in a more effective way, and ramp it up in a way where we're adding more providers essentially to the platform at a faster pace. And on the other side of the platform, we're more intelligent about how we're offering it to people that have made bookings across the Expedia Group host of brands. So I think we got a big business. I think it can be a lot bigger. Very happy with the strategy we've seen in place from the team. And I think it's a great opportunity for us. And again, this is one of these products that just has a lot of potential, but in a big business like ours, where lodging ends up really in the roof, sometimes these things get underfunded. We are putting more capital into it right now, and we're optimistic that it can be a bigger driver going forward. In terms of where else we can make investments to increase supply, listen, I think as we said on the last quarter or the quarter before, this whole locally relevant globally thing supply push has become business as usual. So the answer to your question is kind of everywhere. And we do have a roadmap in terms of where we want to go next. It's dictated by the size of the untapped opportunity, ease of going after it, network effects from country to country. And we're executing a pretty clear playbook here. And we think there are lots of opportunities in pockets all over the globe.

This is Chris speaking on behalf of Lloyd. Referring back to what Mark mentioned about the shift towards international markets, as you start to gain traction with your supply acquisition efforts, some of these markets emphasize performance rather than direct bookings. How should we approach the comparison of growth between direct bookings and performance bookings globally in the next 12 to 24 months?

Sure. Well, I think direct is a channel where it does continue to get stronger in our mature markets. It's also something that gets stronger in every market in which we focus on. And the only issue, if you can call it an issue, is that when you're going into these new markets, you're building brand presence, you're introducing yourself to customers, and then they have a great experience, and you deposit them into your direct channel going forward. Our app transactions, the last time we disclosed it, Hotels.com and Expedia were growing at 50% year-over-year last year. So it's working. But you do see essentially as you drive into these international markets, even though the spend that you're making most cases is basically profitable on a unit basis, is not as profitable as the base business. So when those international markets are growing faster than domestic, it just takes a while to get the overall international picture to look more like the domestic period. I mean, it takes multiple, multiple, multiple years. So we could see again, as we start to get traction, sales and marketing deleverage. But again, remember that in each individual country we're going after, the goal is to make sales and marketing get more and more efficient over time.

You there, Brent?

Yes, I apologize for that. Regarding the question about increasing the pace of share repurchases, could you remind us of the remaining amount in your plan? Where do you currently stand with it? I believe that's the key point. Could you provide a summary of your current status?

Yes. We currently have an authorization of 12.2 million shares available. This authorization is reviewed from time to time at the Board level, so it isn't a limiting factor in any case.

It's Andrew Boone on for Ron. I think Expedia transitioned Air to the cloud in 2019. Can you provide an update there whether you're seeing any additional benefits of cross-selling or conversion? And then secondly, I think you talked about car rentals now cross-selling on Vrbo. Could you just add any additional color on conversion or anything else you're seeing with kind of cross-selling on Vrbo?

This year, we are positioning ourselves to fully migrate our lodging and Air businesses to the cloud. We are currently increasing activity in both areas and will maintain this momentum throughout the latter half of the year. Transitioning to the cloud for Air offers similar advantages as it does for the rest of the business, including improved resilience, reduced downtime, and faster processing speeds. Additionally, it provides enhanced capabilities in AI and other areas that require more flexible computing resources than traditional data centers can efficiently offer. We are in the process of deploying the Air platform and shifting traffic to the cloud, and we expect positive outcomes similar to those we've experienced in other parts of the business. Regarding cross-selling on Vrbo, when customers book vacation homes on Vrbo, they have the opportunity to also book a rental car, flight, or products and activities offered by Brand Expedia right alongside their booking. This feature is branded under Brand Expedia, and we've noticed a strong uptake. It simplifies the process for users, taking advantage of Expedia's trusted reputation. It’s a great illustration of our capabilities, and the results are encouraging.

I wanted to explore the recent increase in international room night growth. A couple of quarters ago, there seemed to be a suggestion that the smaller size of some priority markets would limit their impact on overall room night growth. Has your perspective on this shifted? Is there something else contributing to the international growth? Specifically, I'm curious if you are benefiting from reduced competitive pressure on certain marketing platforms from your rivals.

Right. Well, the two major dynamics that have been happening in international room night growth over the last couple of years, put Easter aside, all these quarter-to-quarter movements, is that we have been adding incremental supply, lodging supply. That has really fueled incremental room night growth for the business. But the international markets that we're going into are markets where the metasearch channel is also pretty significant. So you've got basically a headwind on room night growth, which has been driven by what's been happening with the big metasearch platforms slowing down that again has been masking, if you will, the growth that we see underneath from us adding new inventory and executing on the locally relevant playbook. So as we move through the back half of the year, the trivago comps get a little bit better, and you started to see a little bit of that this quarter as well, not a ton. But in any event, those are the two factors. And once the trivago and another metasearch channel comps ease, we should be in clear skies.

Okay, great. And actually one quick follow-up, if I may, just on the guidance. So if my arithmetic is right, it looks like kind of the implied second half growth rate of EBITDA is a bit of an acceleration versus the first half. But it seems like you guys have a bunch of sort of tailwinds that would be kind of helping you guys in the back half of the year. Alan, maybe could you just walk us through kind of the moving pieces to the guidance, and maybe what's changed as far as how you're going to do this?

Yes, Tom. When considering Expedia Group as a whole, including all its businesses and trivago, our overall guidance suggests significantly faster growth in the first half of the year compared to the second half. This is largely driven by trivago's performance and how their year is unfolding. They are achieving solid profits throughout the year, but this is based on comparing it to a period in the first half of 2018 when they reported losses, while they recorded profits in the second half of that year. This creates the most notable distinction. If you exclude that factor, growth rates in the first half and the second half are fairly comparable. There are some variations, of course, but no substantial differences.

Two, if I could. I guess, on domestic, you've seen kind of steady room night growth, 8%, 9% over a number of quarters now. I guess, to what do you owe the stability of room night growth in your core U.S. market? And then one on international, if I could. Take rates have come under pressure a bit over the last couple of quarters, perhaps, as you've expanded into your focus markets. I guess how you're thinking about how take rates should evolve as you take share in some of these focus markets?

Thank you, Lee. The domestic strategy is essentially about executing our established playbook in the U.S., which we have followed for a long time. This approach leads to increased market share. We are investing in our significant brands, many of which hold great relevance in the U.S. We continue to innovate product features and functionality, as seen in the significant improvements of the Brand Expedia app over the past few years. We are also adding more lodging inventory, including both traditional accommodations and alternative options that we previously didn't have. Particularly with our multi-product brands like Brand Expedia, we are becoming more effective at cross-selling and bundling through features such as the new shopping cart functionality we introduced over the last couple of years. This strategy is our foundation, allowing us to grow at a faster pace than the market, and we aim to maintain this momentum for the foreseeable future.

Yes. Lee, and then your second question about our international revenue margins. I don't think there's any big story there. You're right that they have been kind of inching down over time. I think there are a couple of factors that play year. Overall product mix in international markets plays a role. I think mix between countries obviously can play a role because we don't have the same exact margins in every country. And in certain countries and areas, we do continue to make some minor adjustments here and there to our overall take rates with our hotel partners as we add the supply, making sure that we're going into those countries at market levels. But nothing major going on there.

This is Zach on for Mark. I believe Google recently made some algo changes in the May or June timeframe, so just curious what kind of impact you're seeing in your share traffic, if any, for both your Core OTA and Vrbo segments. And second, raising the low end of your EBITDA guidance, just curious if we look at any of the major expense items, whether it be cloud migration or marketing. Have there been any significant changes relative to your initial plan you set out in the beginning of the year?

Thanks, Zach. With respect to the Google algo changes, this is just business as usual for Google and it's kind of business as usual for a large internet player. So there's nothing specific that I would call out from that. And then Alan, do you want to take the second one?

Yes, I think the main factors here are that we've had a strong start to the year. We initially set a guidance range of 10% to 15%. Given our performance in the first half of the year, we're confident in tightening that range and removing the lower end. There are factors that could influence our results in either direction. trivago's year is progressing as they anticipated at the start of the year, but it's still a relatively new situation for them, which could introduce some variability. Currency exchange and macroeconomic conditions can also impact us positively or negatively. Additionally, the new digital services tax in France is expected to be a challenge for us in the latter half of the year. Finally, regarding our guidance, we want to keep some flexibility to make further decisions and investments as the year progresses. Overall, I would say we feel the teams are executing effectively, and we are pleased with the momentum we've achieved so far this year.

Great. Well, I'd just like to say again thank you for joining the call, and a huge thanks to all the Expedia Group employees around the world just for your continued dedication and hard work as we press forward on our transformation efforts. We've made huge progress. But I'm incredibly excited about the opportunity in front of us. With that, I'll turn it back over to the operator.