Expedia Group Inc (EXPE) — Q2 2021 Earnings Call Transcript

Good afternoon and welcome to Expedia Group's financial results conference call for the Second Quarter ended June 30th, 2021. I'm pleased to be joined on the call today by our CEO, Peter Kern; and our CFO, Eric Hart. Following discussion, including responses to your questions reflects management's views as of today, August 5th, 2021, 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 plan, we expect, we believe, we anticipate, we are optimistic, we're confident that, or similar statements. Please refer to today's earnings release and the Company's filings with the SEC for information about factors that 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. Unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense, and technology and content expense, exclude stock-based compensation. And all comparisons on this call will be against our results for the comparable period of 2019. And with that, let me turn the call over to Peter.

Thanks, Pat. Good afternoon everybody, and thank you for joining us today for our Q2 earnings call. I will be relatively brief, and then Eric will take over and we'll take some questions. I'll open by saying that in general, Q2 was quite strong and a major improvement on Q1, and we were pleased with the progress we made with particular strength in North America and the U.S. As I've said before, the market has been driven by a lot of COVID-related changes and patterns. Domestic travel has been stronger, VR has been stronger, whereas international travel, corporate travel, even big-city travel has been relatively muted comparatively. The good news in that is that we find ourselves in a relatively stronger position in the U.S., our largest market and the largest travel market. But in places like APAC where we have a largely international business, that obviously has not responded as quickly. So, as we look across our performance, there are all those moving parts in the mix, and together what that delivered in the second quarter was a general improvement in the April-May time period, with another significant step-up in June, not unlike what we saw in the first quarter with a step-up in March. July has been impacted somewhat by the Delta variant, and we've seen some backwards movement in July, but in general, still relatively stronger performance compared to earlier parts of COVID. As it pertains to travel patterns, I think it's important to keep in mind that, obviously, we don't know where Delta is going. Places like Australia have had shutdowns. Whereas other parts of the world, including some parts of EMEA, things are opening up somewhat more, but there are still a lot of unknowns, including in the U.S., and we're starting to see some of that reflected in cancellation rates and more volatility in the numbers. I think it's also important to keep in mind that as we move into the fourth quarter, where traditional trends would have leisure coming off and corporate coming up, there remain a bunch of unknowns across the globe in terms of back to school, back to work, and how people will travel in this phase of our COVID times. That being said, as we focused on marketing, Q2 was obviously a time of relative strength, and we aggressively pushed into marketing. We saw the opportunity to get in front of the building momentum in travel. And as we've talked about before, we have a long-term goal of building more brand recognition and pushing more into brand marketing, creating longer-term relationships with customers. Performance marketing, on the other hand, remains considerably volatile, especially as we've seen cancellation rates more recently growing slightly. So, we were relatively leaned into Q2. We expect to be leaned into Q3, but with a bias towards brand building for long-term relationships with customers. And we do believe that whenever COVID subsides in a way that gives people real comfort, there’s so much pent-up demand that travel will outstrip anything we've ever really seen before around the globe. And as we move on, I just want to emphasize that this is an area where we felt there was an opportunity to be stronger. Jon Gieselman joined us in the middle of the quarter. Jon is a great talent coming to us from Apple. He is a terrific brand builder. And brand and performance marketing work together, and we have to really define and build our brands. I’ve talked extensively in the past about rationalizing brands, making them work together, and allocating capital appropriately. We have great confidence in what Jon will bring and has already brought to the organization. Likewise, on the tech side, we brought in a new CTO, Rathi Murthy, from Verizon Media. This again is an emphasis, I've spoken about several times before, but we need to be a technology-first company, and to do that we need great technology leadership. Rathi brings a world of experience to us, and as we move from our multi-stack, multi-domain enterprise that we've had historically into one platform that can service all our brands and all our business partners, it was really important to have great technical leadership across the organization. So, I won't belabor every technical gain, but we are making real progress. We have plenty of work still to do, but we're feeling quite optimistic about Rathi and the changes she is bringing. So, in general, as we watch COVID play out, we're focusing really on investing in our technology and people, organizing our brands, and allocating capital appropriately among them, simplifying our business, and of course maintaining the rigor we've had around driving margin improvement. More broadly, we believe that as vaccines continue to roll out across the globe, that will bring greater security, greater comfort, and greater willingness to travel. But the road may still be bumpy for a while as we watch all the variants play out and various government responses to them. I'll just close by saying we launched today something very important to us that our employees are passionate about, which is a partnership with UNICEF wherein we will drive for every app transaction we have in the company, we will donate to UNICEF to drive vaccination into the developing world. It's clear that not everyone has the access that the Western world has to vaccines, and it's our view that until the world is more fully vaccinated, we really can't expect travel broadly to be back to normal. So, we believe in the movement, we believe in the equitable distribution of vaccines. We want to drive that for all the obvious societal benefits and ultimately because it's good for our long-term business goals. So, with that, I will turn it over to Eric. Thank you.

Thanks, Peter. In early 2020, I outlined multiple areas of focus and I wanted to provide an update on them. It is around driving margin expansion through better unit economics. Since that time, we've made significant progress reshaping our cost structure through the fixed and variable cost initiatives we've outlined in detail on previous calls. Another major focus has and will continue to be on simplifying our business to help enable the company to do it faster and also ensure we're focusing on the most attractive opportunities for future growth and profitability. This has included selling or shutting down businesses we viewed as non-core to the business going forward. To put this into perspective, since the beginning of 2020, we have either shut down or sold eight businesses. These simplification efforts have continued with the sale of ALICE last month, which I would point out will have an immaterial impact on our financials. In addition, in early May, we announced the binding offer from Amex GBT to acquire our Egencia business. Since then, we have been diligently working through different aspects of the offer, and this week we officially accepted GBT's offer. Based on where things currently stand, including all relevant regulatory authorities clearing the transaction and all relevant employee consultations being completed, we now anticipate closing the transaction during this year, 2021. As a reminder, the deal includes two major pieces we outlined last quarter and we remain very excited about. First, we will have a minority equity stake in the combined business. Second, we will also enter into a 10-year lodging supply agreement between Amex GBT and EPS. Finally, this deal further illustrates the continued progress on simplifying our business. Now shifting to the P&L. On revenue, total revenue was down approximately 33% versus Q2 2019, which was a meaningful improvement from last quarter with revenue down approximately 52%. We saw continued strength from Vrbo and improving trends within our hotel business, while ADRs were effectively up across the board from last quarter. From a geography perspective, on a revenue basis, the U.S. showed meaningful sequential improvement in Q2. EMEA revenue also improved, and LATAM and APAC revenue remained roughly flat versus Q1. On our cost basis and overhead, we have significantly improved our cost basis versus pre-pandemic levels, which is reflected in the considerable progress we've made on the cost initiatives outlined in detail over the past 18 months. While we won't see full benefit in the financials until we've returned to more normalized business levels, we remain confident in realizing largely all of the fixed and variable cost savings targeted by the end of this year. Overhead costs totaled approximately $544 million in Q2, an increase of approximately $40 million versus last quarter, which was in line with our expectations. The increase sequentially was largely a result of the shift in compensation structure from bonus to salary, which took effect April 1, and we outlined on previous calls. As it relates to sales and marketing, we increased our spend in Q2, driven by signs of a recovery, although total marketing spend was still well below pre-pandemic levels. For Q3, we are balancing investing into the recovery to build our brands with recent softening trends and bookings that we've observed in July and that Peter mentioned. The net of all of this is we anticipate that we will further close the gap versus pre-pandemic spend, although it will still be well below Q3 of 2019. And in total, adjusted EBITDA was $201 million and included a negative contribution from Egencia, which showed some improvement but continued to lag our retail business. We attribute the approximately $260 million of sequential improvement in adjusted EBITDA to typical seasonality as well as the improving trends we've mentioned throughout the call. On the free cash flow, it totaled approximately $2.3 billion in Q2 on a reported basis, excluding the change in restricted cash, which is primarily driven by the change in deferred merchant bookings, free cash flow was approximately $1.8 billion. Moving onto the capital structure, in terms of the balance sheet, we continue to be investment-grade regular today and will point out that credit agencies recently changed our outlook to stable from negative. There's also no change in our financial strategy going forward. We remain committed to de-levering back to more historical levels as the recovery continues to progress, while also continuing to look for ways to reduce our cost of capital with the underlying goals to be in a strong enough position to restart our capital return program to shareholders. In May, given the positive trends we were witnessing combined with the confidence in our liquidity position, we paid down 50% of the preferred stock that we issued in 2020. We have the right to pay off the remaining balance at any time and we're closely monitoring and intend to pay off when it's prudent to do so. So that's again something that we'll continue to watch over the course of the year and beyond. That said, I remain confident in our liquidity position, which includes approximately $5.5 billion in unrestricted cash as well as $2 billion on a revolver. In closing, we're pleased with the further stabilization of our business in Q2 and remain optimistic about the future of travel and that it will come back as Peter mentioned earlier. It will be like something we haven't seen before. And with that, Emma, we're ready to take our first question. Emma, are you there?

Yeah, thanks a lot. A couple of questions. Maybe just one for Eric. If I look at the deferred merchant bookings, they are up 25% versus 2019. Reported bookings were down 26% versus 2019. Could you just maybe help us understand the gap there? What is driving the differences in the two numbers? And then I have a quick follow-up, maybe just on the simplification of the business. Are there other opportunities that you see on the horizon to simplify the business further?

How about I take the first one and Peter perhaps you take the second one. So, on the first one, our deferred merchant bookings balance was approximately $8.24 billion as of the end of June, and if you compare June to the previous year, it was approximately $4.6 billion. There was an increase in what we call core deferred merchant bookings, which is our more traditional or conventional lodging business, and that reflects obviously improvements compared to 2020. I think you'll see that on the core business that it's largely in line with where the real differences are coming from the Vrbo side of the business. Remember that is restricted. There’s approximately $4.26 billion that’s in that deferred merchant bookings for Vrbo, and that just reflects the healthy growth that we've seen at Vrbo, that we've talked about a number of times before. I would say that there's no increased risk on that core DMB relative to 2019.

Thanks, Eric. And I'll just add now to that in terms of continuing to simplify. I don't think that we expect many more sales or mergers or those kinds of simplifications, but there continue to be opportunities for us to simplify how we do business. I think what I referenced about some of our new leadership presents the opportunity to simplify how our brands work together. What we're doing on the technology side, we believe will continue to unlock opportunities for us, but it's not as simplistic as a sale of the business or something like that. I don't think there are many of those left.

Got it. Thank you, Peter. Thank you, Eric.

Thank you.

Great. Thanks so much. Could you give us a sense of where lodging bookings shook out relative to 2019 both in the second quarter and then what you're seeing in Q3 quarter-to-date? Thanks.

Yeah. So, I'll take it and Eric can add color. Basically, we saw, as I mentioned, a good step function improvement in the second quarter, particularly into June, and we're feeling quite good about that. July started out a little down as Delta had, relative to June, and as Delta has reared its head, we've seen some more volatility, and July is sort of in line with the earlier part of the second quarter. So, hard to tell how the rest of Q3 will shake out. It's been very responsive to the news cycles, but we're obviously optimistic that further openings and talk of the U.S. opening to international vaccinated travel, will create more opportunities, particularly, as I mentioned in the international business, where we have had a relative strength. So, June was the high point and July's looking a lot like April and May.

Then, in regards to Vrbo in particular, and we're not going to go into the detail if you will on the trends in Q2, but as you think about it going forward, the business continues to perform well. We continue to be excited about it. We're seeing terrific consumer engagement. And then one of the things that we are seeing is that they're continuing to be longer booking windows associated with Vrbo. As we project into Q3 and beyond with those longer booking windows, our hypothesis is that people have been exposed to the category and are looking to book again. They also saw compression that was occurring, particularly during the summer. So, people are going in and reserving the house that they want for, whether it's the holiday season or even into next year as well. So again, time will tell in Q3 and Q4 going forward what seasonality looks like in the world that we're in, but we continue to see some really interesting trends from longer-dated bookings for Vrbo.

Thanks, Eric. Thanks, Peter. Very helpful.

They are looking to book again. They also noticed some compression during the summer, with people reserving the houses they want for the holiday season or even for next year. Time will tell in Q3 and Q4 how seasonality will shape up, but we continue to observe interesting trends with longer-dated bookings for Vrbo. Thank you, Eric and Peter. Very helpful.

Okay. I'd like to ask a question about numbers. Sales and marketing as a percentage of revenue was higher in the June quarter than we have seen in a long time, likely the highest for that quarter in several years. I know you've implemented a lot of efficiencies, and Peter, you mentioned volatility in performance marketing. Can you discuss how representative the June quarter was regarding the optimization you aim to achieve with your brand and performance marketing spend? When you look at that number, do you see it as an opportunity, or does that level of sales and marketing spend align with your expectations?

Yeah, I think sorry. Go ahead.

Peter, I’ll provide some context. It's important to keep in mind that our revenue is based on stays, and our marketing spending often leads to bookings that will yield revenue in a later period. As I mentioned regarding Vrbo, we are experiencing very long booking windows, which represent a larger portion of our overall transactions. This makes it challenging to compare quarter-over-quarter with historical data. So, I would advise caution with any simplified analyses, as the differences in booking windows, along with the relationship between marketing spending, bookings, and stay days, complicate things.

Fair enough. And then the second question was about what you wanted to ask.

No, no. Go ahead, Mark.

The second question relates to brands. You still have the staple of brands, so could you discuss the various strengths in different regions? You mentioned Vrbo briefly, but can you elaborate on some of the other brands? Which ones do you believe are performing well in the current environment, and which ones appear to be facing challenges? Please comment on the business from a brand perspective, particularly regarding brands other than Vrbo.

Sure. I think broadly the brands are acting within a range, I would say, of performance. But we have seen, as I've mentioned, opportunities, for example, in Australia where our local brand Wotif and our local VR brand have performed very well because they had a domestic travel bias in that market, and therefore, in a world where there was much more domestic travel, we leaned into those brands relative to leaning into let's say, Expedia brand, which has more international appeal or an international travel appeal. So, we've seen regional moves like that. I think broadly though, and you see some reactions and we believe hotels.com has a slightly higher percentage of unmanaged corporate travel within it. And, of course, corporate travel has been greatly reduced during COVID. So, we've seen some movements like that, but I would say broadly, the brands have performed within a range of one another. We are doing a lot of work to figure out long-term how we want the brands to work together as a family of brands rather than as competitors. I've mentioned some of that within Performance Marketing, but I think you'll see that broadly across the enterprise. As Jon and the team get to rationalizing how we can make those brands all additive to one another as opposed to competitive, and we are continuing to market, again fairly aggressively behind the brand spend. And my comment about the volatility in performance marketing is just to say there continues to be a lot of risk in overextending your SKUs in performance marketing because of the volatility in cancellation rates, shutdowns, and other things. So, on balance, we are slightly more biased towards brand building. And yes, this is a time where we feel, for the reasons I said, that travel, when it can rebound fully, is going to be extremely robust. And this is not a time where we want to be quiet in the market, so we are doing lots of things including our recent move to support UNICEF to get in line with our customer base, get them invested in our brands and the relationship, and drive that for when the future comes pouring in. While that is volatile, we don't exactly know when that will be, we know it's coming, so we want to make sure we're there for it.

Thank you, Peter. Thank you, Eric.

This is a time where we want to be active in the market, so we are doing many things, including our recent partnership with UNICEF to engage our customer base, strengthen their investment in our brands, and prepare for the future. While the timeline for this future is uncertain, we are confident it will arrive, and we want to be ready for it.

Great, thank you for taking the question. I have a couple of inquiries. First, Eric, can you help us understand the dynamics of taking rates and booking windows for the second half? With all the moving parts, it’s a bit challenging to convert bookings into revenues. Any insights you can share regarding taking rates and booking windows based on what you’re observing in July would be appreciated. The second question is about the global supply acquisition campaigns. How has the supply side generally performed, and how should we expect this to translate into bookings, perhaps in the latter half and into next year? Thank you.

Thank you for your question. I recognize your concerns regarding take rates and booking windows, which have required a lot of effort and have caused some fluctuations in our assessments. I would like to provide more detailed insights on what to expect for Q3 and beyond. However, the situation is quite fluid, especially concerning booking windows and take rates, which will vary based on different mixes. As both Peter and I have noted, we continue to see strong performance, particularly with conventional hotels and in air travel, as well as in car rentals, which have also been robust. I appreciate your understanding, and I hope this clarifies things across our various products.

I don't know what happened there? Apologies. I think Eric cut out on us. Hopefully, you can still hear me. I'll just finish by saying that where he was going is the combination of mix has been really different during COVID, so it's a hard thing to tie back to historic levels. Air and other things were down more considerably than lodging and cars, etc. So, it's a little hard to give you much guidance there except to say, we expect to see continued mix shifts during this somewhat COVID period we are in. But we also believe that over time, everything will revert to normal in terms of mix, and we should see more predictable take rates in that period.

Okay. Thanks, Peter. The second question is about supply acquisition campaigns related to wellbore.

Oh, yeah.

Can you talk a little bit about that?

We've been focused on the compressor markets and have experienced good growth and additions in that area. When we can increase our inventory there, it yields a strong return on our efforts. We haven't pursued a broad global acquisition strategy because we believe it's not a wise use of resources, especially since many regions are still restricted. Instead, we've opted for a more targeted approach. As the world continues to reopen, we expect to expand our targets. Overall, adding inventory specifically in compressed sectors has been very productive for us.

Got it. Thanks, Peter. Thanks, Eric.

Yeah. Thank you. We'll find Eric.

Great. Thank you. I think we're all trying to figure out what your earnings can look like on the other side of this, and so the market share is important. People are going to compare your down 26% bookings versus competitive booking which is in the low double-digits. So just wondering if you can help us understand how you think about market share in your core U.S. and Europe markets right now. And second, maybe you can explain some of the differences, maybe your percent of air bookings or how much of your bookings are international versus domestic. Thank you.

Yeah. Thanks for the question, Justin and I will just say so a couple of things to think about there. First of all, as I mentioned, broadly, when you look at conventional lodging, we believe our position is stronger in the U.S. than pre-COVID. But again, that's not the same for all markets. And if you look at a market like EMEA, which came back strong over the summer and came back principally in domestic, that obviously favors some of the other players. And our business in places like EMEA and APAC, as I mentioned, is more international focused. Now that goes to airlift as well because we're very good at delivering long-haul air, which has been virtually non-existent during the COVID period. So, you've seen again, a bunch of these principles at play where we've benefited from some. Others had benefited from others. We generally believe that international will be the next major thing to open up and that favors our position in many of those markets, and we will see that rebound through that side of our business and through the air and all the pieces that are attached to that. But that's really what's going on in market share more than anything, is this a domestic versus international extra start. There are also more bookings into small markets as people have stayed domestic and gone to the equivalent in the U.S. is a small motel near a national park etc., that has not been a traditional strength of ours. We have been better in big cities. Big cities have lagged somewhat: New York, San Francisco, etc., Paris, London. So those factors are all at play. and I would just say that there's been a lot of activity at the lower end of the market and because of their domestic thing. And that's been driving a lot of room nights, but not necessarily a lot of dollars. So, you're seeing shifts like that. We feel pretty good about our position definitely in the US. We'd obviously love to be strong in all dimensions of our game across the globe, but we think, again, that most of this reverts to the mean over time. And as it does, we will benefit from the return of international travel, significantly where in many places in the world that is the biggest part of our business.

Great. And maybe 1 follow-up. Have you disclosed ever how much air bookings were as a percent in 2019?

No. It's fair to look back, and I understand the situation.

Eric, yeah, yes.

Yes. Now, we've not broken that into 50,000 points.

Right. Thank you.

Thank you.

Thanks for taking my questions. I need to go back a bit and focus on the U.S. Can you help us understand where your U.S. lodging business, excluding Vrbo, stands compared to 2019? Additionally, regarding the booking window dynamics in lodging, what insights can you provide about customer dynamics? Are you primarily seeing existing customers, or is there a notable contribution from new users on the platform? What has been driving the growth of the core lodging business in the U.S., excluding Vrbo, so far?

Certainly. I can address the first part of your question. Peter, would you like to cover the latter part? I recognize that there's an effort to incorporate Vrbo into traditional lodging. However, we will not go into specifics at this moment. Regarding Vrbo, as we've mentioned before, we are experiencing strong performance and gaining market share in our key markets, which is encouraging. On the traditional lodging front, we have noticed steady improvement each month during Q2, although there's been a slight decline in July. At this stage, we won’t delve into a detailed analysis of the two segments, but overall, we feel optimistic about the recovery we’re witnessing this quarter.

During COVID, we noticed a lot of direct business as marketing activities decreased overall. While we appreciate this, it largely depended on having people actively searching in the market. As the market starts to return to normal, we've been somewhat cautious with performance marketing due to high cancellation rates and other challenges such as closures. This caution makes it easy to invest heavily in performance marketing without seeing a return, as travel doesn't always happen. We're seeing a stronger mix of existing customers, which is a trend across the industry, evident in rising app usage and other growth indicators. As the market continues to recover and more people search, we expect to return to a more normal balance regarding new customer acquisition. Our enterprise focus is to foster long-term relationships with our customers, aiming for greater customer loyalty and lifetime value. This involves various improvements across marketing, product, and service. We're planning to transform how we build these customer relationships, hoping to reduce reliance on platforms like Google for business discovery. Overall, during COVID, we've experienced better performance from our existing customer base.

Got it. To revisit Eric's response, is the softening observed in July more significant in traditional lodging, or is it fairly distributed across the different product sets?

I think we're seeing it largely across the board now, even extending beyond lodging to all product types. It's unclear if that will continue.

Yeah, okay. Thanks.

Thank you.

Thank you so much. So, Peter, I think you wanted to kind of talk about potential permanent changes to consumer behavior. I think vacation rentals versus hotels are fairly well understood. But are you noticing any change in terms of folks favoring agency versus merchant because I'm sure they probably learned last year they're paying ahead of time and trying to get refunds later on? It's probably something that they probably don't want to do again. So, are there kind of differences in the conversion rate between the 2 types of transactions you can call out? And does that positively or negatively influence your customer acquisition strategies going forward? Thanks.

Yeah. Stephen, please proceed.

I will address the first part of that question as well. I believe we have seen continued interest in agency versus merchant transactions. A few quarters ago, we discussed that consumers are seeking more flexibility, and ultimately, they want options that are flexible. This means they are leaning more towards refundable options given the current uncertainties. Peter, feel free to add to this. However, this shift hasn't impacted our customer acquisition strategy or our overall approach, as we are still operating as a travel company focused on meeting customer needs and preferences. There is a clear trend towards refundable options and agency transactions.

Yeah. And I will just add, Stephen, that we're not trying to drive, as Eric said, we're not trying to drive the customer to any particular outcome. We provide choices by and large. And what the customers do, what they want. There has been a relative bias during COVID for pay later. As you say, perhaps, I could later do something secure around the idea. But there's nothing that I think suggests that that's necessarily a permanent thing. I don't think we know enough yet and we'll see as we come out of COVID, but certainly, we've seen merchant rebound considerably and that may well persist.

Thank you.

Yeah.

Great. Thanks for taking the questions. I have 2 on ADRs. They're up 21% This quarter year-on-year, I believe 22 versus 2019 levels. So, any further breakdown you can provide in terms of this growth, whether it's a deal mix, organic rate increases, or shifts to Vrbo? And how sustainable do you think this is part of the back half of the year?

Peter, I'll address that. Thank you for the question. Regarding the three categories you mentioned, the answer is affirmative for all. There is a geographical mix, and within the U.S., it also includes Vrbo, which generally features higher average daily rates. We're observing variations in core average daily rates across different products. Specifically, Vrbo and car rentals have seen significant increases in their average daily rates, while air travel is recovering but not as robustly as the other two. Conventional lodging falls somewhere in the middle, higher than air but not as high as Vrbo. Looking ahead, especially on the Vrbo side, we continue to see bookings with extended windows. If there is a supply constraint, customers seem comfortable with traveling, and I believe they appreciate that product experience. Therefore, it's reasonable to expect continued positive trends for Vrbo. On the car rental side, potential supply challenges have been previously discussed, and it may take time to navigate through that issue. The remaining demand after the summer season is uncertain. If we consider July an anomaly and recovery continues, our average daily rates should maintain healthy growth moving forward. While I won’t provide exact predictions, I hope this gives you an overview of the trends we're observing across our various products.

Okay. Thank you.

Thank you.

Great. Thanks for taking my question. Questions 2, if 2 if I may. Just can you give us an update on the Vrbo integration with brand Expedia? How's that trending and how are you trying to think about that ahead of the winter? And then as you look out in terms of the international recovery, I mean, have your thoughts changed? You even see countries like Iceland and Israel that are really highly vaccinated dealing with higher spikes, higher case cascade. How has the change in the interim, how do you view the international recovery if it looks like we're going to have to change a multitude of different government policies towards COVID? Thank you.

Thank you, Jed. I believe the second question is more relevant. It's frustrating, confusing, and complex. Countries are taking varied approaches, even within the EU, where we've spent considerable time discussing with EU commissioners to harmonize the rules and establish consistency, as travelers face challenges with the protocols. It remains largely uncertain. We understand that vaccines are undoubtedly the most significant part of the solution we've identified so far. There is ongoing work on other treatment protocols for COVID as well. I think we'll continue to witness improvements, and eventually, COVID will be something the world learns to manage. People will travel again; we are already starting to see international travel resume. It’s not at zero. We're witnessing discussions, and today the U.S. government mentioned that Biden is contemplating allowing vaccinated foreign travelers to enter the U.S. I expect this trend to continue as countries aim to revive their tourism and business travel sectors. There are opposing factors at play, and I believe there will be ongoing pressure to find ways to facilitate travel, although we will continue to see localized COVID issues and governmental reactions. This variety of uncertainties is why we are carefully navigating the situation to avoid overextending ourselves in a market that could encounter problems. Regarding the Vrbo integration, it is progressing but not yet at our desired level. We have increased content, including on hotels.com, but the complete customer experience still falls short of our expectations. We are refining that process as we work towards unifying our technology for our lodging business, which is a key part of our strategy. Although it's a good opportunity that we believe in, there are several steps to bring these systems together, and while the work continues without pause, we are not yet where we want to be.

Thank you.

Yeah.

Thanks for taking my question. Can you talk about with the new CTO coming in, maybe talk about some of the top priorities that you will be undertaking. And also secondly, I think last quarter you guys talked about the success of integrating the marketing platform, something like 75% on that platform. Can you give us an update? And maybe a little bit of implication on the efficiency of the marketing in the back half? Thanks.

Thank you, James. With the CTO's top priorities, as we transition to a unified technology team and architecture, the focus is on defining our direction, methodology, guidelines, and integrating multiple technology stacks into fewer ones. We've developed a multi-tenant extensible set of capabilities that spans across all technology within our enterprise, and we are diligently working on this. On the backend, there's also the customer-facing aspect, which centers around user interface and user experience. Our aim is to lead in design while making progress, and we are concentrating on appointing a new head of design to enhance these capabilities across the enterprise. This initiative encompasses numerous areas, focusing on excellence in all disciplines to deliver the best customer experience and drive improvements in conversion and engagement. Regarding the marketing integration, the percentage has increased from 75 to approximately 85 to 90. This exceeds our initial benchmark as we work towards standardizing our tools, datasets, and algorithms. The exciting part is the opportunity to test new algorithms and potential efficiencies in marketing our various brands. We're still in the initial stages, but these achievements provide us with a foundation for operational improvements in performance marketing. However, it's challenging to establish clear benchmarks because our traffic levels and patterns aren't typical right now, so we can't definitively quantify the efficiency gains. We anticipate more insights in the future as we continue to make strong progress in consolidating tools and data.

Okay. Thanks, Peter.

Thank you.

Hi, everyone. I appreciate the opportunity to ask a question. Regarding marketing and specifically on-brand spending, could you elaborate on which brands you're focusing on and where you're investing? Are these investments supporting existing strong brands, or are you developing new ones? Additionally, should we view this as a long-term shift in your marketing approach, or have cancellation rates returned to normal? Will there be a move back towards higher quality spending? Thank you.

Thanks, Andrew. I would say a couple of things. One, yes, we're investing in relative strength. So, for example, Vrbo has been an area of considerably increased investment, during the past several quarters. Other opportunities regionally where we've put money, whether that's in traditional brand spend or social or other things. So regional brands, in some cases, we've seen increases as well. I would say while we are leaning into that and we're leaning into our biggest brands, obviously in strong markets like the U.S., we believe we can do a lot better in terms of brand messaging, getting cleaner on the brand propositions and, as I mentioned, getting all the brands to work together as a family of brands as opposed to a sort of traditional competitors. So, we think there's a lot of opportunities to not just spend on-brand with a bias towards brand-building, but spend that money more efficiently against even stronger, creative, and more efficient ways to build the brand. So, I think there's a lot of opportunities there. And yes, we intend to also grow in new geos as we refine our capabilities there. And pick markets where we are going to go on the offensive. And then I think as far as performance goes, I think what we're talking about when I say we have a bias towards brand building, is we want to build long-term relationships. But brand spends and performance work together. But stronger brands are better performing, your performance marketing is. As long as performance marketing can return the kind of returns and bring us the kinds of customers, those that are sticky and build long-term value, we will spend into that and we will spend as much as that makes economic sense to do. So, I don't think it's an either-or question. It's a question of right now, having a bias again, towards that brand-building while we see how performance marketing shakes out. But as we get better, we believe we will be able to continue to invest in the performance market and more efficiently than we ever have, and bring the right kinds of customers with the backdrop of brand building that really creates sticky customers for the future. So, I think you'll see us do both. Don't exactly know where the ratios will bear out. We think the Company was overly biased towards performance marketing because we just didn't have all the tools we needed across the brand enterprise. But we think, now, we're in a much different place, so that's where we're going to go. Thank you, Andrew. I think we're at the end. So, I just want to say thank you, everybody. Thanks for your time and I hope we got all your questions answered and we'll speak to you in the quarter. Take care.

Thank you, Operator.