expedia (expe) earnings report: q4 2015 conference call ...speaking of m&a, 2015 was an...
TRANSCRIPT
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
©2014TheStreet,Inc.Al l R ightsReserved Page1of23
Expedia(EXPE)EarningsReport:Q42015ConferenceCallTranscriptThefollowingExpediaconferencecalltookplaceonFebruary10,2016,04:30PMET.Thisisatranscriptofthatearningscall:
CompanyPart icipants
AlanPickerill;Expedia,Inc;VPofIRDaraKhosrowshahi;Expedia,Inc;PresidentandCEOMarkOkerstrom;Expedia,Inc;EVP,OperationsandCFO
OtherPart icipants
JustinPost;BofAMerrillLynch;AnalystMarkMahaney;RBCCapitalMarkets;AnalystNavedKhan;CantorFitzgerald;AnalystTomWhite;Macquarie;AnalystBrianFitzgerald;Jefferies;AnalystMikeOlsen;PiperJaffray;AnalystDouglasAnmuth;JPMorgan;AnalystLloydWalmsley;DeutscheBank;AnalystEricSheridan;UBS;AnalystJedKelly;Oppenheimer;AnalystStephenJu;CreditSuisse;AnalystRonJosey;JMPSecurities;AnalystKenSena;EvercoreISI;AnalystMichaelMillman;MillmanResearchAssociates;AnalystPeterStabler;WellsFargoSecurities;AnalystKevinKopelman;CowenandCompany;AnalystJustinPatterson;RaymondJames;AnalystDanWasiolek;Morningstar;Analyst
MANAGEMENTDISCUSSIONSECTION
Operator :
WelcometotheExpedia'sQ42015earningscall.
Today'sconferenceisbeingrecorded.
AtthistimeIwouldliketoturntheconferenceovertoAlanPickerill,VicePresident,InvestorRelationsatExpedia.Pleasegoahead,sir.
AlanPickerill(VPofIR):
Thankyou.Goodafternoon,everybody.WelcometoExpediaInc.'sfinancialresultsconferencecallforthefourthquarterandthefullyearendedDecember31,2015.
I'mpleasedtobejoinedonthecalltodaybyDaraKhosrowshahi,Expedia'sCEOandPresident;andMark
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
©2014TheStreet,Inc.Al l R ightsReserved Page2of23
Okerstrom,ourCFOandEVP,Operations.
Thefollowingdiscussion,includingresponsestoyourquestions,reflectsmanagement'sviewsasoftodayFebruary10,2016,only.Wedonotundertakeanyobligationtoupdateorrevisethisinformation.
Asalways,someofthestatementsmadeontoday'scallareforward-looking,typicallyprecededbywordssuchasweexpect,webelieve,weanticipateorsimilarstatements.Pleaserefertotoday'spressreleaseandtheCompany'sfilingswiththeSECforinformationaboutfactorswhichcouldcauseouractualresultstodiffermateriallyfromtheseforward-lookingstatements.
You'llfindreconciliationsofournon-GAAPmeasurestothemostcomparableGAAPmeasuresdiscussedtodayinourearningsrelease,whichispostedontheCompany'sIRwebsiteatir.expediainc.com.IencourageyoutoperiodicallyvisitourInvestorRelationssiteforimportantcontent,includingtoday'searningsreleaseandanupdatedinvestordeck.
Asareminder,wesoldour62.4%ownershipstakeineLongonMay22,2015,whichwaspreviouslyaconsolidatedentityofExpedia,Inc.ForGAAPaccountingpurposes,theresultsofeLongareincludedinourresultsthroughthedateofthesale.Butinordertoallowinvestorstocompareourcurrentresultsonalike-for-likebasiswithourhistoricalresults,ourcommentaryintheearningsreleaseandonthiscallisprincipallyfocusedonourresultsexcludingeLong,whichshouldbeconsideredinadditiontotheGAAPresultsonafullyconsolidatedbasis.
Finally,unlessotherwisestated,allreferencestocostofrevenues,sellingandmarketingexpense,generalandadministrativeexpense,andtechnologyandcontentexpensealsoexcludesstock-basedcompensationanddepreciationexpense,andallcomparisonsonthiscallwillbeagainstourresultsforthecomparableperiodof2014.
Andwiththat,letmeturnthecallovertoDara.
DaraKhosrowshahi(PresidentandCEO):
Thanks,Alan.IwantedtostartrightupfrontthankingouremployeesallovertheworldforanotherstrongyearforExpedia,Inc.Mark,AlanandIgettotellyouaboutandtakepubliccreditforthesuccessofourCompany,butit'sanamalgamationofeveryone'sdedicationandgoodworkthataddsuptothefiguresthatwewillreviewtoday.Andthefigurestellaconsistentlystrongstory.
Grossbookingsfor2015up24%to$59.7billionandtotalrevenueup19%to$6.6billion.Ourcustomersbought35%moreairlinetickets,36%moreroomnightstotalingmorethan$200millionfortheyear,and37%morecardaysin2015versus2014.Wedeliverednearly$1.2billionofadjustedEBITDAfortheyear,impressiveinitsownright,butespeciallysowhenyouconsiderthehugeheadwindsfromforeigncurrency,thesignificantinvestmentswearemakinginresettingourcontractedmarginstructurewithourhotelpartners,andthedeal-relatedcoststhatweincurredinconnectionwithourbusyyearofM&Aactivity.
SpeakingofM&A,2015wasanunprecedentedyearforExpediaaswecompletedover$6billionofstrategicacquisitions,whichincludedTravelocity,amajoritystakeinourAirAsiajointventure,asignificantminorityinvestmentinDecolar,OrbitzWorldwide,andmostrecently,ourlargestacquisitioneverinHomeAway.ThesetransactionshaveconsolidatedandscaledourUSoperations,extendedourinternationalreach,andhaveopenedupanewlegofgrowthinthealternativeaccommodationsector.
WealsodivestedourstakeineLongforaniceprofitandenteredintoalong-termalliancewithCtrip.
BrieflyonOrbitz,theintegrationisprogressingwellwithnearlyallofthedirecttypeintrafficofOrbitz.comandCheapTicketsalreadyontheBrandExpediaplatform.It'searly,butresultssofarlook
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
©2014TheStreet,Inc.Al l R ightsReserved Page3of23
promising.Themigrationworkwillcontinuethroughthefirsthalfof2016,followedbyoptimizingthesitesandtuningtheirvariablemarketingchannelspostmigration.
WearealsoactivelyworkingonotherpartsoftheOrbitzbusiness,includingeBooker's,HotelClub,OrbitzPartnerNetwork,andOrbitzforBusiness.OurgoalistomigratethevastmajorityofourOrbitzforBusinessclientsontotheEgenciaplatformbeforeyear-end.
WearealsoinactivedialoguewithourOPNprivate-labelpartnersonexpandingourrelationshipswiththem,andweseetheseeffortscarryingthrough2016andinto2017forcertainpartners.
Movingforward,weareplanningtoinvestaggressivelyinourprivate-labelandpartnershipcapabilitiesandconsiderthisareahighlystrategicforourCompany.
IwillalsoaddthatweareverypleasedwiththetalentlevelandexecutioncapabilityofourOrbitzteamsallovertheworld.Thepeopleandthebrandswehaveaddedtoourfamilywillpayanimportantroleinourfuturesuccess.
It'sveryearly,butweareencouragedwithHomeAway'sQ4performancecominginabitaheadofourexpectationsandhavebeenconsistentlyimpressedwiththeleveloftalentthere.HomeAwaywillbeoperatedlargelyasastandalonebusinessandwillserveastheendtoendvacationrentalandhomesharingplatformfortheExpediaInc.family.
Thatsaid,weplantobehighlyevolvedwiththeHomeAwayteam,helpingthemexpandaggressivelyandmovefromtheirtraditionallistingsmodeltoafullyonlinetransactionalmodel.Theteamisbeginningtointroduceaservicefeetotravelers,andweexpectthatitwillbefullylaunchedonitsUSvacationrentallistingsinthecomingmonths,slightlyaheadofschedule.
Aroundthesametimewe'rerollingoutlowersuppliercommissionsforpaperbookinglistings,aswellasabookwithconfidenceguarantee,whichisdesignedtoencouragetravelerstobookonHomeAwayandgivethemincreasedpeaceofmindwhentheydo.
Westartedanintegratedmarketingcampaigninsomeofourmajormarketsandintendtoreinvestincrementalupsidefromtravelfeesbackintothebusiness,particularlyinproducttechnologyandmarketing.Weremainconfidentinourestimateof$350millioninadjustedEBITDAforHomeAwayin2018.
WecontinuedtoseestronggrowthforTrivagoinQ4and,infact,forallof2015.We'vehadsomeinvestorquestionsinregardstoTrivago'scoregrowthandprofitability,andwewouldliketosharesomenumbersforEuropeanmarketsversustherestoftheworld.Totakeoutthenoisecreatedbyforeignexchangefluctuations,thenumbersherearestatedineuro.
Trivagodelivered2015standalonerevenueofroughlyEUR490million,upnearly60%yearoveryearwithadjustedEBITDAofafewmillioneuro.Nowwithinthesenumbers,theirmostmatureEuropeanmarketscollectivelyhadrevenueofoverEUR250million,up20%yearoveryear,andwithacontributionmarginafterdirectmarketingcostsofabout25%.Trivago'srestofworldmarketshadrevenueofEUR235million,upnearly130%andacontributionmarginjustabovebreakeven.
NotealsothatoverheadcostsforTrivagohavebeenrunningintheneighborhoodof10%ofrevenue.WhileweexpectTrivagotoachievehealthytopandbottomlinegrowthin2016,wewillcontinuetoreinvestprofitsfromcoremarketstofurtherscaleinexpansionmarketsonaworldwidebasis.TheTrivagoteam'sfirstrateandwebelievethattheglobalgrowthrunwayforthisbrandcontinuestobesubstantial.
Lastly,underpinningouractiveM&Astrategyandinvestmentinhigh-growthbusinessesisacoreorganicbusinessthathasneverbeenstronger.BrandExpedia,Hotels.com,ourExpediaAffiliateNetworkbusinessallhadterrificyears,deliveringhealthyroomnightandadjustedEBITDAgrowth.Egencia,our
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
©2014TheStreet,Inc.Al l R ightsReserved Page4of23
corporatetravelbusiness,hadanotherexcellentyear,signingupover$1.1billionofnewclientbusinessanddelivering12%adjustedEBITDAgrowth.Supportingallofourbrands,ourlodgingsupplyteamisalsofiringonallcylinders,signingupnearly60,000newdirectlycontractedhotelpropertiesin2015,upover30%yearonyear.
SinceIopenedmyremarkswithouraccomplishmentsasaCompany,Iwillclosewithsomethoughtsaboutkeychallenges.Competitionforconsumerattentionisasstrongaseverasourcompetitorsandinsomecaseourpartnersinvestandinnovateaggressively.
Wearealsojumpingintothealternativeaccommodationspacewherethere'salreadyasizablecompetitorandwherewehaveasignificantbusinessmodeltransitiontoundertakeatHomeAway.AndasIdescribed,wehaveheavyintegrationworkwithOrbitz.Thesemanners,alongwithavolatileglobalmacroeconomicclimate,togethercreateaverydynamicandchallengingenvironmenttosaytheleast.
Thatsaid,ourbusinessesandourteamsarenostrangerstothesekindsofchallenges.We'refocused,wearehungry,wehaveanestablishedexecutionandcapitalallocationrecord,andwetakethesechallengesheadonandwithconfidence.
Withthat,I'llhandittoMark.
MarkOkerstrom(EVP,OperationsandCFO):
Thanks,Dara.OnequickreminderbeforeIgetstarted.Aswasthecaselastquarter,inordertohelpwithcomparability,ourcommentstodayarefocusedonExpediaresultsexcludingeLongsincewesoldour62%ineLonglastMay.FinancialresultsforthatbusinessareincludedinourGAAPresultsonaconsolidatedbasisthroughthedateofthesale.
Wewerequitepleasedwithourfinancialperformanceinthefourthquarterandforthefullyear2015,excludinganestimatedheadwindof$10millionto$15millionfromtheimpactoftheterroristattacksinParisandthenegativeimpactofHomeAwayinthequarternotcontemplatedinourpriorguidance.Ourfull-year2015adjustedEBITDAgrowthexceededtheguidancewegaveonourQ3call.
Inthefourthquarter,toplinegrowthwasdrivenbysolidunitgrowthacrossproducts,geographiesandmajorbrands.Ofcourse,wearegettingaboostasweconsolidateOrbitz,butdespitethelawoflargenumbers,ourorganicgrowthratescontinuetobeveryhealthyandcomparabletotheratesofgrowthwe'veseenforthelastcoupleofyears.
Inhotel,revenuegrew24%onroomnightgrowthof39%.Theinorganiccontributionstohotelrevenueandroomnightgrowthwere14and15percentagepointsrespectively.WeestimatethenegativeimpactfromPariswasaround300basispointsforbothmeasures.Revenueperroomnightwasdown11%inQ4ona5%declineinaveragedailyrates.
NotethattheGAAPbetweenrevenueperroomnightandADRsnarrowedthisquartercomparedtoQ3,principallyonreducedforeignexchangeimpacts.Wedoexpecttoseecontinuedyear-over-yearpressureonrevenueperroomnightin2016aswetradesomeofouruniteconomicstodrivevolumeandglobalscale.
Airrevenuewasup61%onticketgrowthof70%,partiallyoffsetbyadeclineinrevenueperticketof5%.
BrandExpediacontinuedtogrowticketvolumeatahealthyorganicrate,alongwiththesizablecontributionsfromrecentlyacquiredcompanies.Excludingacquisitions,airrevenuegrew6%onticketgrowthof22%.
Keytoourstrategyistogrowadditionaltravelproductsalongsideairticketsandroomnights.Wewere
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
©2014TheStreet,Inc.Al l R ightsReserved Page5of23
pleasedtoseesomegoodexamplesofthisinQ4,including66%transactiongrowthforourlocalactivitiesbusinessand43%revenuegrowthforourinsuranceproduct.
WealsocontinuetoseesolidgrowthinouradvertisingandmediabusinesswithTrivagogrowingstandalonerevenue27%orapproximately43%currencyneutral,fairlyconsistentwiththeyear-over-yeargrowthwesawinQ3.MediaSolutionsalsogrewrevenuenicelywithaboostfromtheadditionofOrbitz.
HomeAwayfinished2015stronglyandabitaheadoftheirplansasmeasuredonastandalonebasis.ForExpedia,Inc.,HomeAwaycontributedrevenuethisquarterofapproximately$20million,whichhasbeenclassifiedasotherrevenueinourproductclassification.WearebreakingoutHomeAwayasaseparatesegment,soyouwillbeabletoseetheirstandaloneperformanceonanongoingbasis.BecauseHomeAwayisintheprocessofmovingtoanonlinebookingmodelandafairbitofthebookingsstilloccuroutsideoftheplatform,we'renotplanningtoreportgrossbookingsorunitgrowthforthatbusinessatthistime.
AlthoughtheseasonalityofourbusinesscancausetheshapeofourP&Ltovaryquartertoquarter,wecontinuetodrivetoresultsthatuseleverageachievedinkeyexpensecategoriestofundaggressivesellingandmarketinginvestmentsaroundtheworld.InQ4,excludingtheimpactsfromOrbitzandHomeAway,theP&Lwedeliveredwaslargelyconsistentwiththisapproach.Sellingandmarketinggrewabitfasterthanrevenue,whilecostofrevenueandG&Agrewslowerprovidingleverage.
Ourtechnologyandcontentexpensesdidgrowfasterthanrevenueandnearly6percentagepointsfasterthanQ3onacombinationofhigherpeoplecostsalongwithlowercapitalizationrates.
WecontinuetoscaleupourcoreinfrastructureandBrandExpediatechnologyteamstosupportorganicgrowthandtodrivetheintegrationofournewOTAbrands.Andassuch,weareexpectingelevatedtechnologyandcontentexpensegrowthatleastthroughthefirsthalfof2016.
Importantly,ourresultsforQ4includedthefirstfullquarterofOrbitzandthelayeringinoftheHomeAwaystandalonefinancialsforthe17daysofthequarterthatweownedthebusiness.
TheoperationsofOrbitzforafullquarter,alongwithdeal-relatedandintegrationcosts,resultedinanapproximatebreakevenadjustedEBITDAcontributionforthatbusinessinQ4,whichincludedapurchaseaccountingrevenueheadwindofapproximately$27million.
Overall,theOrbitzresultswereabitbetterthanwehadexpectedonacombinationoflowerintegrationcostsandbetteroverallperformance.
HomeAwayhadanegativeimpactonadjustedEBITDAof$14millioninQ4,notcontemplatedintheguidancewegaveonourQ3call.Thisincludedtheresultsofthebusiness,thenegativeimpactofdeal-relatedcosts,andapurchaseaccountingrevenueheadwindofapproximately$6million.
Briefly,asweenteranewyear,Iwouldliketoremindfolksofafewkeyaspectsofhowwemanagethebusiness.Wearecommittedtostrikingabalancebetweendeliveringhealthyprofitgrowthinthenearandmidtermwhilemakingkeyinvestmentsinourbusinessthatwillallowustogrowsustainablyovermanyyearstocome.
Fromapracticalperspective,thismeansthatwhenweseecertainupsideand/oroutperformancefrommonthtomonthorquartertoquarter,includingfromacquisitions,wehaveabiastoreinvestatleastaportionofthatupsidebackintothebusiness.Aspartofthisapproach,wedonotguidetoquarterlyresults,andinvestorsshouldnotexpecttoseethefullamountoforganicoverperformanceorM&Arelatedwindfallsdropimmediatelytothebottomline.Thisisanimportanttenetforhowwearerunningourbusiness,andwewantinvestorstofullyunderstandthisapproach.
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
©2014TheStreet,Inc.Al l R ightsReserved Page6of23
Turningtoourfinancialexpectationsfor2016,onaconsolidatedbasis,includingallofthebusinessesweowntodayandexcludingeLong,weareexpectingfull-yearadjustedEBITDAtogrowintherangeof35%to45%yearoveryear.ThecontributiontothisresultfromafullyearofOrbitzandHomeAwaycombinedisexpectedtobeintherangeof$275millionto$325million.
Intermsoftheshapeoftheyear,weareexpectingparticularpressureonQ1adjustedEBITDA.Duetotheseasonalnatureofourbusiness,backendloadingofadjustedEBITDAdollargrowthisnotunusual,thoughwedoexpecttheimpactwillbeespeciallyacutein2016.ThisisdueprimarilytotheintegrationofOrbitzandthetimingofsynergyrealization,whichwillrampinthebackhalfoftheyear,alongwiththetransitionatHomeAway.
Asafurtherreminder,notethatwelappedouracquisitionofWotifinthefourthquarterof2015andwilllapboththeTravelocityacquisitionandtheconsolidationoftheAirAsiaExpediajointventureinQ1,whichwillcreatetoughercomps.Further,therolloutofTripAdvisor'sInstantBookproductwillalsolikelytocontinuetobeasmallheadwindonroomnightgrowthin2016withaninsignificantimpactonprofitability.
Fromanexpensestandpoint,includingOrbitzandHomeAway,whilewewillseeleverageandcostofrevenueandgeneralandadministrativeexpensesin2016,weexpecttechnologyandcontentexpensestogrowfasterthanrevenue,primarilydrivenbyintegrationeffortsandtheinorganicimpactsofourrecentacquisitions.Regardingtaxes,asyoumightimagine,there'slotsofmovingparts,especiallyrelatedtonewlyacquiredcompaniesandourinternationalversusdomesticmix.However,wecurrentlyexpecteffectivetaxratesinthemid-20%range.
Finally,somedirectionalcoloronourCapExtrends.In2015,wesawsignificantCapExgrowthwithabouthalfofthedollargrowthattributabletothepurchaseofourfutureheadquarters.Spendingforrealestateingeneralalsowaselevatedaswecontinuedtogrowourmarketmanagementteamaggressivelyandbuiltoutnewofficespacearoundtheworld.
Inaddition,weinvestedheavilyinserversandotherhardwareinanticipationoffutureorganicgrowthandupcomingintegrations.Toalesserextent,anincreaseincapitalizedsoftwaredevelopmentcostsalsocontributedtoyear-over-yearCapExgrowth.For2016,weexpectamuchmoremoderatepaceofCapExgrowth,mostofwhichwillbedrivenbytheinorganicimpactofrecentacquisitions.
Withthat,let'smovetoQ&A.
Operator,willyoupleaseremindparticipantshowtoqueueupforquestions?
QUESTIONS&ANSWERS
Operator :
(OperatorInstructions)
JustinPostwithMerrillLynch.
Just inPost (Analyst-BofAMerrillLynch):
MaybetwoquickonesforDaraandoneforMark.Housekeeping.First,Dara,canyoutalkaboutthemacroenvironment?ObviouslyalotoffearswithsomeoftherevPARdataoutthere.WhatyouareseeingmaybeUSandEurope?AndthentheS-4,alotofushavereadit.ReallyinterestingcommentaryontheHomeAwayacquisition.Inthereisa2018numberof$2.34billioninEBITDA.Canyoucommentonthatnumberatall.Howimportantthatis?Isthatsomethingatarget--orhowyouthinkaboutthatnumber?
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
©2014TheStreet,Inc.Al l R ightsReserved Page7of23
Andthen,Mark,justtoconfirmyourguidance,isthenumberyouaresuggesting,35%to45%growth,isthatoffthe$1.165billionorthe$1.103billion(sic-seepage18ofpressrelease)inEBITDAthisyear?Thankyou.
DaraKhosrowshahi(PresidentandCEO):
Sure.Thanks,Justin.Asfarasthemacroenvironmentgoes,welistentothesamenewsthatyoudo,andcertainlythenewssuggeststhatthemacroenvironmentisprettyuncertainandthestockmarketnowisscary.
Thatsaid,whenwelookatthemacroenvironmentandhowitaffectsourbusiness,oneimportantfactorinourbusinessistheairbusiness,andairticketpricesaredownprettysignificantlyyearonyear.It'sobviouslysomeofthesavingsofoilpricesthatarebeingpassedonbytheairlinestoconsumers,andthat'sanunambiguouspositiveforus.Themore--thelowerairticketpricesgo,themoretheleisuretravelertendstoflyandthemoretheleisuretravelertendstofly--asyouknow,wehaveabitofwhatwethinkisthestrategicinvestment--strategicadvantageontheairside,andthemoreleisuretravelerswehaveflying,themoreopportunitywehavetosellhotelsandinsuranceandcarsandeverythingelsetothem.
Sotosomeextent,weaknessinoilontheairsideisaprettybigpositiveforus.
Onthehotelside,whilewehaveseenADRsweakenabitbetweenacallatthebeginningoftheyearinQ4,whenwelookatQ4trendsintoJanuary,wedon'tseeanythingofnoteonewayortheother.Therearesomespotissuesobviously.Parisisweak,whichisperfectlyexplainable.NewYorkADRscontinuetobedownyearonyear,althoughthey'veimprovedoverQ4,andthat'sEuropeantravelersreallytravelingintotheUSandtheeffectofforeignexchange.AndAsia,weseecertainmarketslikeHongKongandMacaudownasfarasADRsgo.Butagain,nosignificantshiftswhenwelookatQ4trendsintoJanuarythatareofnote.
Soit'ssomethingthatwewillwatch,andtotheextentthatweseeanything,wewillcertainlyshareitwithourinvestors.Butwearenotseenanymaterialmovementonewayortheotherrightnow.
MarkOkerstrom(EVP,OperationsandCFO):
Andthen,Justin,onyourquestionon2018consolidatedEBITDAthatwascontainedintheS-4,listen,atthetimeoftheacquisition,weputforwardsomeforecastsforwhatwebelievedwereapossibleoutcomeforconsolidatedExpedia,Inc.resultsoverthecourseofthenextthreeyears.Itdidnotaccountanyupsidesanysignificantinvestments.It'sapossibleoutcome,soIwouldn'tputalotofweightonthat.ThatwasthencombinedessentiallywiththeHomeAwayprojections.Andwedidnotatthattimecontributetothecombinationofthoseresults.
Solisten,Ithinkyoucouldlookatitasapossibleoutcome,butit'scertainlynotsomethingthatIwoulduseasguidance.AndIthink,asyouknow,wemakediscretedecisionsfrommonthtomonth,quartertoquarter,sothere'salotthatcanchangebetweennowand2018.Andwe'rejustreallyfocusedoncontinuingtohaveabusinesswherewecandeliverconsistentlystronggrowthratesoveralongperiodoftime.
Intermsoftheguidance,the35%to45%growthisoffofthe$1.165billion,whichistheExpedia,Inc.full-year2015numberexcludingeLong.
Just inPost (Analyst-BofAMerrillLynch):
Thankyou.
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
©2014TheStreet,Inc.Al l R ightsReserved Page8of23
Operator :
MarkMahaneywithRBCCapitalMarkets.
MarkMahaney(Analyst-RBCCapitalMarkets):
TwoquestionsandonejusttofollowuponJustin'squestion.Soifyoudothat35%to45%,itkindofimpliesthatthecorebusinessisgoingtogrow--yourguidanceimpliessomethinglike9%to10%atthelow-endto19%atthehigh-end.Socallit10%to20%justaroundhere.Andthat'sobviouslyalittlebitmoreaggressivethanthekindofguidanceforthecorebusinessyougavegoinginto2015.Soitdoessoundlikeall-inbusinessconditionsaregettingstrongerforExpedia,butIjustwanttomakesureI'minterpretingthenumbersandstatingthatright.
Andthensecondly,intermsofthe--you'veguidedforrevenueperroomcontinuingtocomedownin2015.AndthequestionIwouldwanttoaskis,willitcomedownatthesamepaceoracceleratedpaceorlessofastrongpace?Inotherwords,whatwesawinthequarterwasthat11%year-over-yeardeclinewasalittlelessthanwehadseeninthelastcoupleofquarters.Arewestartingtoseeafadedowninthatpressureyouareseeingonrevenueperroomnight?Thankyou.
DaraKhosrowshahi(PresidentandCEO):
Mark,IwillletMarktakemostofthatquestion,butonethingIwillremindyouasfarasthecorebusinessisthatforeignexchangewasareally,reallysignificantheadwindforourcorebusinessthislastyear.AndwhiletheywillcontinuetobeaheadwindinQ1,Q2,itwilleaseupinthebackhalfoftheyear.Soallthingsbeingthesame,thatwillbeabenefitin2016versus2015.
IwillletMarkanswertheothers.
MarkOkerstrom(EVP,OperationsandCFO):
Yes,Iwouldjustsayjustagaintoclarifyontheguidance,Iwouldtakethatascoreimpliedguidanceofcloserto8%to13%.IwouldtakethehighontheOrbitzHomeAwayimpactandsubtractitfromthehighonthetotalandthelowfromthelowside.Iwouldn'ttakeourguidanceasbeingupto19%.
Andthen,listen,ourrevenueperroomnight,we'vebeensayingforawhilethatthegapbetweenrevenueperroomnight--youcouldthinkaboutthatas,callit,the300to800basispointrange.Anditmovesaround.Ithinkwhatyou'llseein2016isyouaregoingtocontinuetoseethatrangeofmovementtowardsthebackhalf.Ithinkthere'sapossibilityaswestarttocompoversomeofthemarginreductionswedidthisyearasthatstartstoease.AndthenIthinkyou'llstarttoseeIwouldexpectsomemoreeasinginthataswemovethrough2017.And,again,thisiswithregardstothegapbetweenrevenueperroomnightandADRs,ofcourse,becauseADRsareoneofthebiggestdriversofoverallrevenueperroomnightmovements.
MarkMahaney(Analyst-RBCCapitalMarkets):
Thanks,Mark.Thanks,Dara.
Operator :
NavedKhanwithCantorFitzgerald.
NavedKhan (Analyst-CantorFitzgerald):
Twoquestions.JustontheHomeAway--Iknowit'sstillearlydaysforthetransitionbuttothetransitiontoonlinebookings,butcanyoujusttalkaboutwhatkindofpenetrationrateyouthinkyoucanreasonably
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
©2014TheStreet,Inc.Al l R ightsReserved Page9of23
gettobytheendofthisyearintermsofthecostindaysofbookingshappeningonlineversusthe(inaudible)developments.
AndthenIhadafollow-upontheguidance.SoIthink,Mark,youhadcalledoutthecontributionfromthetwoacquisitions,OrbitzandHomeAway,totheEBITDAnumber.ButIthinkpreviouslyyoutalkedaboutOrbitzseeingsynergiesofuptoorinaccessof[$75]million.Isthereanyupdatetothatnumber?
MarkOkerstrom(EVP,OperationsandCFO):
Sure.Whydon'tItakethelastquestionfirstandthenDaracanchimeinonHomeAway.
Sojust,again,onthe$275millionto$325millionofadjustedEBITDAcontributionforthetwoacquisitionscombined,firstofall,IwouldjustremindpeoplethatonastandalonebasiswehadsaidOrbitzwasontracktodoaround$135millionofadjustedEBITDAin2015.Ithinktheycameinalittlebitaheadofthat.ButIthinkthatasadecentbaseinHomeAway,alittlebitbetterthan$120millioninadjustedEBITDAfrom2015.Theywillbothhavepurchaseaccountingheadwindsonthemin2016,botharound$10millioneach,sothinkaboutthatasabouta$20millioncombined.Sotakethatasyourbase.
Andthenthewaythatwegettoobviouslythehighernumberissynergies.AndalotofthatisgoingtocomefromOrbitz,andit'sgoingtocomeinthebackhalfoftheyear.Infact,inthefirstpartoftheyear,we'regoingtobeinapositionnotunlikewherewewerewithWotifwherewewereessentiallycarryingalmostdoublecosts.We'vebuiltupteamstosupporttheintegrationoftheOrbitzbusinessesontotheBrandExpediaplatforms,forexample,atthesametimeasmaintainingtheOrbitzexistingplatforms.
Andthenit'sreallyoncewegettheplatformtransitionsdone,whichisreallyhappeninginthefirsthalfoftheyearforthebigconsumerbusinesses,that'swhenyoustarttoseesynergyrealizationcomein,andthat'sreallystartingagaininthebackhalfoftheyear.Andwe'rehopefulthatbytheendoftheyear,weshouldbeprettyclosetoarunratenumber,butwe'renotgoingtobeevenclosetothatinthemiddleoftheyearandwewillprobablybesubthat.Therewillbeadetrimentinthefirstpartoftheyear.
DaraKhosrowshahi(PresidentandCEO):
AndthenasfarasHomeAwaygoes,asoftheendoftheyear,wehadabout60%ofourtotallistingsonlinebookable.Wedon'tdisclosetheactualpercentageofbookingsthatrunthroughourlistings,andwe'regoingtobeworkingonincreasingthepercentageofonlinebookablelistingsin2016andgetitmuchcloserto100%,asmuchaswecan.Really,we'regoingtobepushingonlinebooking,offeringittoourpartners,andthat,alongwithabookwithconfidenceguaranteefortravelers,wethinkisgoingtobewinforourtravelers,andit'salsogoingtobeawinforoursupplierbaseaswell.
Andthat'sreallythefocusofthebusiness.Wewilltrytoobviouslydrivetheonlinebookingvolume.Butthatisreallymuchmoreofalong-termgoalforusasacompany,andIthink2016isgoingtobeaboutsettingthebase,makingsurethetechnologyinfrastructureisright,andmakingsurethatwe'retakinganyandallkinksoutoftheonlinebookingprocesstomakeitincrediblyeasyfortravelersandincrediblyeasyforsubscribersaswell.Wedon'thaveaspecifictargetforpercentageofbookingsgoingoverthetransom,sotospeak,for2016.
NavedKhan (Analyst-CantorFitzgerald):
Thankyou.
Operator :
TomWhitewithMacquarie.
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
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T omWhite (Analyst-Macquarie):
Great.Thanksfortakingmyquestion.Justfirstonroomnightgrowth,youtalkedalittlebitaboutheadwindsfromthebooking.comInstantBookingimplementation.Couldyoumaybecommentonwhatsortofheadwindthatwasto(inaudible)thatgrowthinthequarter?
Andthenjustafollow-uponHomeAwayandmovingaheadwithinstitutingthisconsumerbookingfee,IguesswhenHomeAwayisindependent,wecanseehowthatextramarginwouldreallyhelpthem--fromthefeewouldreallyhelpthemintermsofcompetingandinvestingagainstAirbnb.Butnowthatit'spartofabiggerExpedia,howdoyouguyswaythebenefitofthatbookingfeeintermsofincreasedmonetizationversusthepossibilitythatitnegativelyimpactstheconsumerexperience?Thanks.
MarkOkerstrom(EVP,OperationsandCFO):
Thanks,Tom.SoI'llstartwiththeroomnightgrowthandthenturnovertoDaraandHomeAway.
Sotherewereafewheadwindsforusonroomnightgrowthinthequarter.Wehadabouta400basispointhardercomppartiallyonthebackoflappingoversomeprettystronggrowthinTravelocitywiththecommercialagreementimplementationandthenalsoWotifwhichwewerelappingoverinthequarter.Wealsohadabout300basispointsofroomnightgrowthimpactfromtheParisattacksweestimate,sobothofthosewereprettysignificantheadwindsforus.
IntermsoftheInstantBookimpact,Ithinkifyouthoughtaboutthatinthe100to200basispointrange,thatwouldbeagoodbarometer.
Andthenjustintermsofexpectationsfor2016,weareexpectingtoseesomedecelerationinroomnightgrowthaswemovethroughtheyear.Wearealsocompingoveracquisitionsandconsolidationsagainin2016.Travelocity,forexample,rampingupWotifonvariablemarketingchannels,theintegrationofBrandExpediaAsia.
SoIwouldjustkeepthoseinmind.AndthentotheextentthatTripAdvisorrulesoutInstantBookingmorebroadly,whichwecurrentlydoexpectthemtodoandwecontinuetonotparticipateinthat,thatcanbeanincrementalheadwindandthinkaboutthataslargerthanthe100to200basispoints.Itcouldbe200to300basispoints.Butagain,insignificantfromtheperspectiveofprofitability.
DaraKhosrowshahi(PresidentandCEO):
AndasfarasHomeAwayandthebookingfeegoes,listen,we'regoingtobewatchingitveryclosely.Weobviouslywanttheconsumerexperiencetobegreat,andweareobviouslygoingtobewatchingthepercentageofbookingsrunningoverthesystem.Wethinkwiththebookwithconfidenceguarantee,wearegoingtogiveourconsumers--ourtravelersalotofconfidenceasfarasbookingwithHomeAwayandmakingsurethattheygetwhattheyexpect,makingsurethatthey--iftheyhaveanyissuesregardingqualityortheirdeposits,etc.,theyaretakencareof.
Andthenwewillbelaunchingothermetricssuchasthetraffictothesite,theconversionratesofconsumerscominginwholookatlistings,therenewalrateofoursubscribers.
Sothereareahostofothermetricsthatwe'regoingtowatchandmeterinordertomeasurewhatisabalancedapproach,whichiswedothinkthatweareundermonetizingrelativetoourvolumeandmakingsurethataswemovetocallitmarketmonetizationrates,weareprovidingagreatexperiencefortravelerswhoarecomingandlookingforagreatplacetostayonHomeAway,andwearebringinggreatvaluetooursupplyaswell.
IwillalsoremindyouthatthebookingfeeissomethingthathasbeenwidelyacceptedasfarasAirbnb
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
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andTripAdvisorgo.Airbnbhasalwayshadabookingfee.TripAdvisorintroducedbookingfeeslastyear.Thosetransitionshavegoneveryverysmoothly.Ourpricingisgoingtobequitecompetitive.Sothisissomethingthathasalreadybeenmarkettested,andwefeelprettygoodmovingintothismodelbasedonthecompetitionalreadybeingthere.
T omWhite (Analyst-Macquarie):
Great.Thankyou.
Operator :
BrianFitzgeraldwithJefferies.
BrianFitzgerald (Analyst-Jefferies):
Wantedtoaskalittlebitaboutthesecondderivativeeffectsyouhaveyoutalkedaboutonintegration.So,first,youconnecttheinfrastructureandtheplumbingandthenthemachines(inaudible)gleanedthatandlearnedandthenyouapplythoselearningsandoptimize.SpecificallywithmaybeOrbitzormaybeevenAwayifthatprocessisgoingonthere,too,istheprocesslengtheningatalljustonthesheerscaleorsizeofthoseintegrations,ormaybehowisthisprocessplayingoutcurrently?
DaraKhosrowshahi(PresidentandCEO):
Iwouldsay,Brian,ontheOrbitzsideactually,whilewehaven'tgonethroughthefullprocess,IwouldanticipatethatOrbitzwouldactuallybeabitquickerthanTravelocityandWotifbecausetheOrbitzteamthatwasalreadyinplace,theyhadanonlinemarketingteamthatwasverysophisticated,theyhaveananalyticsteamthatisjustexcellent.
SoanumberofthefolkshavebeentherewithOrbitz.Theyunderstandtheseoptimizations.Thisissomethingthatthey'vedonebefore.We'rejusthopingthataswemovethemovertooursupplybaseandaswemovethemovertoourtechstack,theyarejustgoingtohaveamachinethatismuchsmootherandbetterthanthemachinethattheyhadtoworkwithinthepast.
Sowedon'tanticipateanyhiccupsasitrelatestoOrbitz.Youneverknow.Andatleastthetrendsthatweareseeingearlyonareencouraging,andthingslooktobeontrack.
HomeAwayisaverydifferentanimal.HomeAwayisnotanintegration.Thatteamisgoingtobelargelyindependent,andtheactivitywithHomeAwayhasbeentomakesure,frankly,thatthatteamisnotdistractedasbeingpartof--partofbeingExpedia.Ithinkwe'refreeingupabunchoftheirtimetofocusfrom,callit,publiccompanyactivitytovalue-addedactivity.Buildingagreatconsumerexperience,buildingagreatsubscriberexperience.Andbecausewearevery,veryfamiliarwiththistransactionalmodel,ourproductandtechnologyteamsarealreadyworkingwiththemtomakesurethattheroadmapsarewhattheyshouldbe.
AndIthinkthesecondareawherewecanaddvalueismakingsurethatasthisvolumecomesonlineorastheselistingscomeonline,we'renotonlypushingHomeAwaytraffictothem,butalsoExpediaandHotels.comtraffictothem,whichIthinkisofsignificantvaluebothfortheHomeAwaysubscriberbasebutalsofortheExpediaandHotels.comconsumerbaseswell.
MarkOkerstrom(EVP,OperationsandCFO):
Brian,I'lljustaddonethingonOrbitzisthatwedohave,inadditiontotheOrbitzCheapTicketsbusiness,whichisthebigconsumerbusiness,wealsohaveanumberofotherbusinessesthataregoingtotakealittlebitlongertointegrateOrbitzpartnernetwork,forexample.We'resuperexcitedaboutthatbusiness,
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
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andwearetakingthestepsnecessarytodothatright.Makingsureweworkwithpartnersandcometotherightoutcome,forexample.OrbitzforBusinessisanotherone.We'reprettyexcitedaboutthespeedatwhichwe'regoingtobeabletomovethat--thoseclientsovertotheEgenciaplatform.Butagain,itisgoingtotakealittlebitlonger,andbothofthesetransitionsarenewinthatwehaven'tdonealotofthesebeforeunlikethecoreconsumerbusiness.
Sointermsofsynergyrealization,Iwouldjustkeepinmindthatuntilthosebusinessesaremigratedoff,youdon'tgettoseethefullplatformofretirementbenefitsthatyouwouldifitwasonlyOrbitz,CheapTicketsandeBookersthatweweretransitioningover.
BrianFitzgerald (Analyst-Jefferies):
Great.Thanks,Dara.Thanks,Mark.
Operator :
MikeOlsenwithPiperJaffray.
MikeOlsen (Analyst-PiperJaffray):
Justtwoquestionshere.YoumentionedTripAdvisorInstantBookingimpactingroomnightsin2016totheextentthatyoudon'tparticipate.SocouldyoutalkabouthowyouarethinkingaboutthemodelorothersimilarmodelsandwhyExpediamayormaynotbeinterestedinparticipating?
Andthensecondly,doyouexpecttheimpactoftheParisattackswillcontinuebeyondaoneortwoquartertimeperiod,oristhatarelativelyshort-termissuethatyouwouldn'texpecttoimpactthebusinessbeyondQ1?
DaraKhosrowshahi(PresidentandCEO):
Hi,Mike.Iwillanswerthesecondonefirst,whichisyouneverknow.Historically,thesekindsofattackshaveresolvedfairlyquickly.IwouldsayParisingeneral,wesawimmediatelykindofaneffectonbroaderEuropeandestinations,andthataffectlookslikeit'sdisappeared.Buttherecertainlyis--continuestobeaneffectinParis.It'sgettingbetter.ButthetrendsinParisarecertainlypoorcomparedtothetrendsthatwehadseenbeforeQ4oflastyear.
SoIthinkParisisgoingtocontinuethroughtheyear.Itwasahorrificevent,andIthinkitwasthekindofeventthatstaysinpeople'smemories.SoIthinkthattherewillbesomeeffectgoingintothebalanceoftheyear,andwe'regoingtodoourbesttomakeupforthat.We'regoingtodoourbesttoworkwithourpartnersoverthereandreallycontinuetopromoteParisasthewonderfuldestinationthatitis.Sohopefullyitwon'tlastlong.Butmypersonalfeelingisthattherewillbesomeeffectgoingintothebalanceoftheyear.
AsfarasthetripandInstantBookandhowweviewthatchannel,we'vebeenveryconsistentabouthowweviewanyvariablechannel,includingInstantBook,inthatwelookattheeconomicsofachannelbasedon,callit,animmediatetransaction.Andthenwelookattheeconomicsofthetransactionbasedonthelifetimevalueofthecustomer,bothintermsofthecustomerrepeatrateandthepercentageofthetimeinwhichthosecustomersrepeatdirectlywithusasecondandthirdtimearound.Obviouslythelatterismuch,muchmorevaluable.
TheinitialversionofInstantBookwasIthinkquiteunsatisfactoryasfarasthebranding,etc.,andrepresentationofwherethecustomerwasreallytransactingwith.Andthelatestiterationsthatwe'veseenwithbooking.comandwithsomeofthesupplierdirectpartners,forexampleMarriott,lookalotbetter.Theylookmuchmoreclear.
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
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SoIwouldsayatthispoint,InstantBooklooksbettertousthanitdidwhenInstantBookwasinitiallylaunched,butwedon'thaveanycommentsastowhattheultimatedecisionisgoingtobedowntheroad.
MikeOlsen (Analyst-PiperJaffray):
Thankyou.
Operator :
DouglasAnmuthwithJPMorgan.
Unidentif iedPart icipant :
Thisis[Daly]inforDoug.Thankyoufortakingourquestion.Ihavejustafollow-upontheHomeAway.SoonHomeAway,youguysmentionedthattravelerfeewillrolloutinthenextcomingmonths,butcouldyouclarifyalittlebitmoreonthetimingoftherolloutplansalittlemore?AndthencouldyoucommentonyourmarketingapproachforHomeAwayin2016andwhatdrivestheconfidenceonyour$350millionEBITDAnumberin2018?Thankyou.
MarkOkerstrom(EVP,OperationsandCFO):
Yes,IthinkasfarasHomeAwaygoes,wearerollingoutnowintheUS,andthespeedoftherolloutisgoingtodependonthereactionofcustomers,conversionrate,howit'sworkingoutwithsubscribers,etc.
Sotherolloutwillmovequicklytotheextentthatweseethingsworkingout,andwewillbedebuggingactively.Wewillthen--oncewearedonewiththeUSoroncewearewellunderwaywiththeUS,wewilllookattherestoftheworld.
But,listen,theserolloutsareliverollouts,andwedon'twanttohardcodeaspecificrolloutcadence.Obviouslywewanttorollitoutasquicklyaspossible,makingsurethatourcustomerexperienceandoursubscriberexperienceisterrific.
AsfarasamarketingapproachforHomeAway,wedoplanasignificantyear-on-yearincreaseinbrandmarketinginHomeAwayfor2016.That'sincludedinthenumbersthatMarkrelatedtoyou.It's--themarketingcampaignisalreadystarted.Andtheearlysigns--andweareaboutfivemarketsontheearlysignsasfarasvisitstotheHomeAwaysiteslookreallygood,andweareencouragedbythetrendsthatwesee.
Onceonlinebookingreallystartstoexpand,wewillbeabletothrottleupvariablemarketingchannelsaswegetvariableeconomicsontherevenueside.Oneoftheissueswiththesubscriptionlistingproductisthatyoudon'tearnmoneyoneverysingletransaction.Youareearningmoneyonanannualsubscription,soyoucan'tnecessarilybidforthecriminaltransaction.
Oncewehaveonlinebookingexpanded,alongwiththetravelerfee,andvolumesrolloutthere,wedothinkthatwewillbeabletoincreasevariablemarketingchannels,butwethinkthat'ssomethingthat'sgoingtohappeninthebackhalfoftheyearasopposedtothefronthalfoftheyear.
Andthenlisten,onthequestionoftheconfidenceinthe$350millionEBITDAin2018,wemadethoseestimatesbasedonasetofassumptions--earlysetofassumptions.Andsofar,inthecoupleofweeksthatHomeAwayhasbeenapartofthefamily,wearemoreimpressedthanwewerewhenwemadethoseassumptions.It's2018.That'salongtimefromnow,butIthinkwhatwewantedtocommunicateisthatyoukindofgointoacompany,youmeetthepeople,youtakealookatthetechnologystackandtheproductroadmaps,andeitherit'sgoodnewsorbadnews.AndatthispointwithHomeAway,it'sgood
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
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newsforus.
Unidentif iedPart icipant :
Thankyou.
Operator :
LloydWalmsleywithDeutscheBank.
LloydWalmsley(Analyst-DeutscheBank):
AcoupleifIcan.FirstforgivemeifImissedthis,butwhenyoutalkaboutthe2016contributionfromOrbitzinawayof$275millionto$325million,whatisembeddedinthatintermsofthedeferredrevenuethatyouwon'trecognize?IknowintheS-4,yousaidHomeAwayalonecouldbeashighas[107],butisthereanassumptionthatyoucansharewithusaroundhowmuchisexcludedfromthat?
AndthensecondifIcan,justcuriousifyoucangiveusasenseforwhatyou'reseeingfromearlybetahotelsontheaccelerator[bid]takerateproductandwhendoyouthinkthatmightrolloutmorebroadlyandwhatkindofimpactitmighthaveonrevenueperroomnightheadwindsyou'vebeenseeing?Thanks.
MarkOkerstrom(EVP,OperationsandCFO):
Sure,Lloyd.SoI'lltakethefirstoneandthenturnitovertoDara.Onthe$275millionto$325million,thereisabout$20millionofpurchaseaccountingimpactembeddedinthat.AbouthalfofitisOrbitz,halfofitisHomeAway.ThebulkofitwillunfoldinthefirstquarterwithsomeoftheHomeAwaystufftakingalittlebitlongertobleedoff.Itis--theHomeAwayimpactisafairbitlowerthanwehadanticipated/fearedatthetimeofacquisition.Weduginverydeepwithourauditorsandadvisersandcametotheconclusionthattherewasasignificantlylargerportionofitthatwecouldrecognizethanwehadanticipated.Sogoodnewsonthatfront.
DaraKhosrowshahi(PresidentandCEO):
Andasfarasacceleratorgoes,listen,it'svery,veryearly.Wearetrainingourmarketmanagerswhoarenowgoingoutthereandexplainingacceleratorinmarket.Weare--andweareseeingincertainmarkets--weareseeingengagementswithourhotelpartners.Thepartnerswhohaveengagedwithacceleratorproductareprettydarnhappy,whichisgreat.Youwantclientswholiketheproduct,andsoweseeacceleratorstartingtocontributetoouroverallnumbers.
Ingeneral,acceleratorisamoveinthedirectionofhavingmuchmoreofmarketplacemodelforourmarginssothathotelierscanbidupwhentheyneedvolume,theycangotobasebidwhentheydon'tneedvolume,andalsoalongwithbidding,yougetthequalityofcontenttothehotel,howthesehotelstreatourcustomers,qualityofservice,etc.,anduserreviewsallmixingintoacombinationofthebesthotelforthebestcustomerandalsoeconomicsthathotelierswanttobidatandobviouslyhopefullyeconomicsthatworkoutforus.
Soweareveryearlyonthisjourney.Thesignsthatweareseeingwithacceleratorsofarareencouraging.We'renotmakingaggressiveassumptionsinour2016plansforaccelerator,butifanyofourmarketmanagerteamsarelistening,weexpectyoutodobetterthantheconservativeplansthatwehave.
Sowe'rehopingforthebest.We'renotcountingthebest.
LloydWalmsley(Analyst-DeutscheBank):
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
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Thanks,guys.
Operator :
EricSheridanwithUBS.
EricSheridan (Analyst-UBS):
InoticedBarryDillerrecentlygaveaninterviewsayingthatExpediawasfarfromdoneonM&A.So,Dara,oneforyouwouldbecapitalallocation,howyouthinkaboutthemixofassetsyouhavenow,geographic,aswellascapabilitiesunderthebroaderExpedia,Inc.umbrella,andsohowyouthinkaboutallocatingcapitalgoingforwardtowardsM&Aandcontinuingthestrategicvision.
Andthennumbertwowouldbe,there'sbeenalotofcommentsoflatefromsomeoftheinventorysidelikeHiltonandMarriottwithrespecttolowercommissionratesandlastroomavailability.Wantedtogetyourtakeonhowtheindustrydynamicisplayingoutaroundlowercommissionrates,morestablecommissionratesversuslastroomavailabilitiesattheme.Thanks.
DaraKhosrowshahi(PresidentandCEO):
Sure.AsfarastheM&Afront,listen,wewillbeopportunisticasfarasourcapitalallocationgoes.Ithinkthattheteamismoreinworthyfocusedrightnowthenlookingtogooutandaggressivelyacquire.Althoughwehaveaterrificcorporatedevelopmentandstrategyteamwhoareconstantlytalkingtoanyoneandeveryone.
Whenwelookattheportfolioofassetsthatwehave,especiallywithHomeAwayaspartofourfamily,wefeellikewehaveafullportfolio.Wefeellikewedon'thaveanycompetitiveholes,andifwedon'tengageinanyM&Aforthenexttwo,threeyears,wewouldbeperfectlyhappy.
Thatsaid,wedowanttoextendourinternationalcoverage.IthinkweareingeneraltooUSdependent.Atthispointit'sareallygoodthingbecausetheUSeconomyisthestrongesteconomyintheworld.Soit'spositivenow,butfive,10yearsfromnow,it'sshameonusifwehaven'tgrownsignificantlymoreoutsideoftheUSinallthemarkets,Asia-Pacific,LatinAmerica,Europe,etc.
Thesecondareawhereweabsolutelywanttogrowandscaleisinthecorporatetravelmarket.Obviouslywe'reverystrongonleisuretravel.Corporatetravelwethinkisanenormousopportunity.It'sahigheryieldofcustomersetsthatoursuppliersfavor.Thedemandpatternsarequitecomplementaryofleisuredemandpatterns,andwewanttogetbigger,wewanttoscale,andweseegrowthaheadforEgenciathatisacombinationoforganicaswellasinorganicgrowth,andwethinkthat'sgoingtocontinueforsometimegoingforward.
Andthenwewillalsolookforinnovativenewcompaniesoutthere.Trivagoobviouslywasaterrificone,andit'savery,veryvaluablepartofthefamily.WemadesomeinvestmentsinAlice,forexample,onthesupplytechnologyproduct.Sowewillbeopportunisticwingsasfarastransportgoes.Wewillcontinuetobeopportunistic.Wewillcontinuetoshootbullets,sotospeak,andseewhatopportunityisoutthereintheworld.
Thatsaid,thebusinessthrowsoffalotofcashflow,andhistoricallyIwouldsaybeforethisyear,therewasafairamountofcapitalallocationgoingtobuybacks.Andtotheextentthatwedon'tseeanythingexternalandtotheextentthatwelikeourownstockandtypicallywehavelikedourownstock,wewilllooktoallocatesomecapitalinternallyaswell.Soit'skindof--theworldisouroyster,andwe'rethrowingoffalotofcash.Andwewilltryourbestnottowasteit.
Asfarasthenoiseandthechatterwiththechains,etc.,listen,wecontinuetobestrongpartnerswiththe
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
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hotelsingeneral.Ourvolumeswithindependentsandchainshavegrownsignificantly,andourstrategywithourchainpartnersisnodifferentthanouroverallstrategy,whichistolowerourbasecommissionssothatthereisverylittlefrictioninworkingwithus.Andthenreally,anyhotel,whethertheyareachainoranindependentcancompeteinourmarketplaceforshare.Andthisisa--it'sabigmarketplace.Themarketplaceisonlygrowing,andifyou'vegotcompetitivepricingandyou'vegotgreatcontentandyoutreatourcustomersreallywellandyouprovideexcellentavailabilityalongwithmargins,you'lldowellinthemarketplace.
SoIthinkthattheultimate,callit,performanceofthechainsandtherelationshipwiththechainsandthevolumethatwedowithchainsisreallygoingtobebasedonchainbiddinginourmarketplaceagainstindependents,andingeneral,weseeourchainvolumes.Theyhavebeenhealthyforanumberofyears,andweexpecttoseethemhealthyonagoforwardbasis.
EricSheridan (Analyst-UBS):
Great.Thankyou,Dara.
Operator :
JedKellywithOppenheimer.
JedKelly(Analyst-Oppenheimer):
CanyoutouchonwhatHomeAwaysubscriberchurnhasbeensincetheacquisition,andwhatisyourcurrentplanaroundsubscriptionpricing?
Andthenafollow-up.HaveyouseenanincreasewithvacationrentalCPCs,particularlyinregardstohome--toAirbnbclosingitsrecentfundingroute?
DaraKhosrowshahi(PresidentandCEO):
Asfaras--theonethatIcanmakeacommentonisthatrenewalratesinQ4actuallyimprovedandwerethehighestrenewalratesfortheyear.Soweareveryhappyaboutthat.
AsfarasanincreaseinvacationrentalCPCs,wehaven'tseenanyonemoretheother,soIcan'treallycommentonthat.
JedKelly(Analyst-Oppenheimer):
Thankyou.
Operator :
StephenJuwithCreditSuisse.
StephenJu (Analyst-CreditSuisse):
Dara,youcontinuetoveryquicklyaddsupplytoyourpropertyportfolioasyouadjustyourfeestructures.Sosettingasidetheremovalofabout20,000indirectrelationshipsforthefourthquarter,Ithinkyouaddedabout73,000in2015.Sojustwonderingifthere'sawayforyoutoacceleratethepacethere.
Additionally,Iwaswonderingifyoucouldgiveussomecoloronthetypeofincrementalpropertiesyouareadding.Aretheselargerproperties,smallerproperties,andistheroomcountperpropertysimilartowhat'salreadyontheplatform?
Andsecondarily,Ialmosthateaskingthisquestion,butdirectionally,areyouseeinganyimpactfrom
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
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stepsoncountriesmaybetakingEuropetotightentheirbordersduetotherefugeecrisis?Thanks.
DaraKhosrowshahi(PresidentandCEO):
Asfarasthesupplyquestionandthepacingofoursupplyadds,weareprettyhappywiththepacing.Sowetendtoacceleratethepacingofadstotheextentthatweseehigherpenetrationincertainmarkets.Higherpenetrationmeansthatwearesendingplentyofdemandintoaspecificmarket,whichmeansthatwecanacquiremorehotels.Andatthispoint,weareseeingthegrowthofdemandintothemarketplaceandthegrowthofsupplybeaboutright.SoIwouldexpectthesamein2016,andasweareaddingmoresupplyandasthenewinventorycontributesrevenueintoourmarketplace,wethengoontohiremoremarketmanagers.
It'saformulathatwe'vehadinplaceforabout18months,andIseenoreasontochangeit.Itcertainlylookslikeit'sworking.
Asfarasthekindofsupplythatweareadding,asweareaddingmoresupply,we'retendingtoaddsupplyinsecondaryandtertiarymarkets.Andtheaveragenumberofroomsperhotelisgoingdown.
Sowhenwelookatcontributionfromnewhoteladds,it'snotsomethingwedisclosed,butit'ssomethingthatwecertainlylookatinternally.Thecontributionperhoteladdisgoingdown,andit'sgoingdownbecauseofthekindofsupplythatweareadding,andit'sworkingexactlytoformula.Soit'sexactlywhatwewouldexpecttosee.
Asfarasimpactsfromcountriesattherefugeecrisis,etc.,wehaven'tseensignificantimpactotherthantraveltoIwouldsaybroadareasthatareaffectedbytherefugeecrisisordirectlyaffected.Itisobviouslydown.Butwehaven'tseenkindofsecond-orderstuff.SotravelintoEuropeingeneralwas--continuestobeprettyhealthy,andwe'renotseeinganysignificantstepchangesindemandpatternsthere.
StephenJu (Analyst-CreditSuisse):
Thankyou.
Operator :
RonJoseywithJMPSecurities.
RonJosey(Analyst-JMPSecurities):
Justwantedtofollowupontwo,please.Dara,youmayhavementionedIthinkonEric'squestionaroundhotelcommissionsandreallythereadinessofthemarketplace.Iwantedtounderstandalittlebitmoreascommissionscomedown,asthemarketplacetakesintoaccounthowthatrelatesrelativetoyourcommentontheacceleratedprogrambeingvery,veryearly.
Andalso,justanotherfollow-uponOrbitzandthecontributiontoEBITDA,couldyouquantifymaybe,Mark,orhelpusunderstandthecostsavingsrelatedtothechargesyoutookaround$130million,$150millionrelatedtoemployeeseveranceandcompbenefitsthatwereannouncedinNovemberonOrbitz?Thankyou.
DaraKhosrowshahi(PresidentandCEO):
Asfarasthecommentsontheacceleratorprogrambeingearly,it'sliterallybecausewejustlaunchedtheprogram.Sothisisaproductthatweareco-completeoninQ4,andwe'vebeenworkingwithourmarketmanagersandhotelpartnersonlaunchingitofficially.Andthat'ssomethingthatwillcontinueaswemovethroughtheyear.
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
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Itisabiddingtypeofproduct.Soasyoucanimagine,thesemarketplacetypeproductstendtogrowoveraperiodoftimeasyougetmoreplayersengaginginthem.
Soit'searly.Welikewhatwesee,butagain,we'renotmakinganyheroicassumptionsfinanciallyasitrelatestoouracceleratorprogram.Butitiscertainlyagoodstart,andwethinkit'saterrificproductthatisgoingtobearealwinforourhotelpartners.
MarkOkerstrom(EVP,OperationsandCFO):
Andthen,Ron,justontherestructuringchargesandhowthatflowsthroughtoEBITDAcontribution,Iwouldjustyousaythatinthe$75millionrunratesynergyestimatethatweinitiallyputout,abigchunkofthatwasheadcount-relatedcostreductionsessentially.There'sabitofrevenueinthereaswell,butpredominantlyheadcountrelated.SoIwouldlookattheseverancechargesasbeingrelatedverycloselytothatnumber.
Iwouldalsosaythatintheoverallbignumberisafairbitofequity-relatedcompensationwhichdoesnotshowupinadjustedEBITDAobviously.Soit'shardertotranslatethatintoanadjustedEBITDAimpact,andalotofthatrelatedtoseniorteamthat'snotthere.Sohopefullytheygivesyoualittlebitmorecolor.
RonJosey(Analyst-JMPSecurities):
Itdoes.Thankyou.
Operator :
KenSenawithEvercoreISI.
Unidentif iedPart icipant :
Hi.Thankyou.Thisis[Connor]onforKen.Justtoclarify,wasthereanFXimpactdisclosedfortheadjustedEBITDAguidance?Thankyou.
MarkOkerstrom(EVP,OperationsandCFO):
Yes,Connor,therewasn't.ButdirectionallyIcouldsaythatitisabitmorethantheimpacttorevenue.SoIwouldthinkaboutitinthe600to700basispointrange,maybealittlebithigher.
Unidentif iedPart icipant :
Thanks.
Operator :
MichaelMillmanwithMillmanResearchAssociates.
MichaelMillman (Analyst-MillmanResearchAssociates):
Followingup,Iguess,onanearlierquestionyoudiscussedtheoutlookfortravelandforleisuretravel,what'stheoutlookforbusinesstravelintheUS,particularlythinkingintheoilcountryoughtandoutsidetheUS.
Also,onethingthathasn'tbeendiscussediscarrental.WhatdoyouseeistheimpactofUberonthecarrentalbusinessintheUSandEurope?
Andfinally,justIkindofmissedamidstthe35%,45%EBITDAguidanceiscomparedwithwhatparticularnumberfor2015?Thankyou.
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
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DaraKhosrowshahi(PresidentandCEO):
Sure.Asfarasthecorporatetravelandthetrendsthatweareseeing,listen,wehavegotsomecaution.Iwouldsaytheteamsarecautiousaboutclientsalesingeneralbecauseofthemacroeconomicenvironment.ThemostcleartrendthatwecanpointtorelatingtooilpricesisintermsofourbusinessintheNordics.Asyouknow,weacquiredViaandintegratedintoEgencia,andwedoseevolumesintheNordicregionsingeneralweak,andthatisverymuchrelatedtooilpricesbeingdownsignificantlyonayear-over-yearbasis.
Ingeneral,transactions--corporatetransactionslookgood.We'renotseeing,callit,verysignificantspendcutsonewayortheotherlikewesawacoupleyearsback.Weareseeingsometradingdown.Sotherevenuepertransactionsorgrossbookingpercorporatetransactionisdownabit,andwethinkthat'sjustcautiouspracticefromsomecorporationsouttheretradingdown,callit,frompremiumclasstoeconomyclassortakingatraininsteadoftakingaplane.Butthoseare,Iwouldsay,ontheedges.We'renotseeingsomebigthemeonewayortheotherasfarascorporatetravelchangingsignificantlyonewayortheother.
AsfarasthecarrentalandtheimpactofUber,ourcarrentalbusinessiswethinkveryearlyinitsdevelopment.Thevolumeincardaysisupverysignificantlyonayearoveryearbasis,over30%onayear-over-yearbasis,andmostofthatbusinessisintheUS.AndwethinkwehaveatonofpotentialasfarasourcarrentalbusinessinEuropegoes.
SoIjustthinkthatweareonagrowthpathatthispointthatisnotgoingtobeaffectedbyUber.We'renotgoingtofieldmarketnumbersonewayortheotherjustbecausethegrowthratesthatwehavearesohigh.
IfIweretogeneralizeitinQ4,othertrendsthatwesawinthecarbusiness,onHotwireside,wesawahigherconcentrationof,callit,agencybookingsversusopaquebookings.Wetendtomakemoremoneyonopaquebookings.Sothatwasonetrendthatwesaw,butotherwisenothingtosay,hey,thisisUberwhoishavingamaterialeffectonthebusinesstospeakof.
Mark,doyouwanttotalktotheotherquestion?
MarkOkerstrom(EVP,OperationsandCFO):
Yes,Michael,ontheguidance,the35%to45%fullyearyear-on-yeargrowth,includingHomeAwayandOrbitz,isinrelationtothe$1.165billioninadjustedEBITDAfor2015,whichisExpedia,Inc.excludingeLong.
MichaelMillman (Analyst-MillmanResearchAssociates):
Right.Thankyou.
Operator :
(OperatorInstructions)
PeterStablerwithWellsFargoSecurities.
PeterStabler (Analyst-WellsFargoSecurities):
Dara,ahigh-levelone.Onloyaltyprograms,obviouslyHotels.comandOrbitzhaveprettyhighprofileofferings.Whatkindofappetitedoyouhaveforfurtherinvestmentbehindthoseprograms,andshouldtheseprogramsbeexpanded,orarethereotherplatformsintheExpediafamilywhereyoushouldrollfurtheronesout?
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
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DaraKhosrowshahi(PresidentandCEO):
Absolutely.IwouldalsoaddthatExpediahasaprettysignificantloyaltyprogram,andIthinkbetweenHotels.com,ExpediaandOrbitz,wearerunningprettycloseto40millionloyaltymembersonaglobalbasis.AndIwouldsayourappetitehereisunlimited,andthewaytoexplainthatisthatthevariableeconomicsbehindtheseloyaltyprogramsareallworking.
Inotherwords,welookatthepointscosts,welookattheultimateredemptionvalueofthosepoints,thepercentageofpeoplewhoareusingpoints--customerswhoareusingthepoints,andwhentheyusethem,andthenwelookatthebehavioroftheconsumersandlike-for-likeconsumerswhoareintheprogramversusthebehaviorofconsumerswhoarenotintheprogramandhowthatbehaviorchangesintermsofrepeatcharacteristicsandintermsofchannelmix.
Whenwelookatthosefactorsandcompareittothepointcosts,theseloyaltyprogramswork.
Soaslongasthefactorsarenotunchanging,aslongastheserepeatcharacteristicsaren'tchanging,aslongasthechannelmixisn'tchanging,andaslongastheultimateredemptionvalueisn'tchanging,thenwewilllooktoexpandtheseloyaltyprogramsasaggressivelyaswecanonaglobalbasis.
Therearesomecountrieswheretheprogramsworkreally,reallywell.Forexample,we'vebeenpresentlysurprisedintheAsia-Pacificregionswhereloyaltyhasreallytakenoffand--forexample,onawelcomerewardsbasis,it'sgotthehighestpenetrationof,callit,welcomerewardsorhotelrewards--excuseme.It'sgotthehighestpenetrationofhotelrewards,bookingsasapercentageoftheoverallcustomerbase.SoweseesomecustomerbaseswholovetheseprogramsinAsia-Pacificregions,butingeneral,thevariableeconomicslookgood,andwewillcontinuetoinvestaggressivelyintheseloyaltyprogramsonagoforwardbasis.
TheotherreminderthatIwouldputforthisthatthepointscoststhatwetakeareupfront.Thebenefitsfromtheseloyaltyprogramsaretrailingbenefits,sotospeak.Becauseyougetthelower--therepeatbenefits,yougetthechannelbenefitsdowntheline.So,aswearegrowingtheseonamemberbasis,typicallywearepayinganupfrontcost,andwearebuildingupaprettysubstantialasset.Wethinkthisisagreatcompetitivemoatthatwearebuildingaroundourbrands,andweintendtokeepinvestingbehindthatmoat.
PeterStabler (Analyst-WellsFargoSecurities):
Thankyou.
Operator :
KevinKopelmanwithCowenandCompany.
KevinKopelman (Analyst-CowenandCompany):
IwantedtoaskaboutAirbnb.There'sbeenalotofdiscussionabouthowAirbnbisimpactingthehotelindustry.CanyougiveussomecoloronwhatyouareseeinginyourhotelbusinessfromAirbnbandhowyouarethinkingaboutthatastheyeargoeson?Thanks.
DaraKhosrowshahi(PresidentandCEO):
Weweredebating,Kevin,whenwewouldgettheAirbnbquestion,sothankyouverymuchforthat.
Listen,we'renotseeing--wedon'tseesignificanteffectofAirbnbonourbusiness.IwouldrelateittotheanswerIgavewithcar.Ourgrowthratesaresubstantiallydifferentfromindustrygrowthrates.Sojustbecausewedon'tseeit,itdoesn'tmeanthatthatisnothappening.
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
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WehavesaidthatAirbnbingeneralandHomeAwayareaddinginventoryinthemarketplace,lodginginventoryinthemarketplace,andit'sbecomingmoreandmoreclearthatthereisacertainsetofcustomerswhosometimeswillstayatahotel,sometimeswillstayinaAirbnboraHomeAwayhome.Soanytimeyouincreasesupply,youwillputpressureonpricing.Sowewill--weanticipatepressureonpricing.WedoseeitsometimesduringperiodsinwhichthereisSuperBowl,let'ssay,oreventshappeningincitiesthatusedtosellout.
Wehaveobservedthatitsometimesgetsharderforhotelstoyieldupduringthoseevents.Andsometimes,whereasinthepastwewouldnothaveinventoryforthoseevents,wetendtohaveinventoryforthoseevents.Soinsomeway,youcouldconsiderapositiveasitrelatestoourmarketplace.
Andthenfinally,anytimeyouhavemoresupply,youputpressureonpricing,youasanintermediary--meaningus--wanttohaveaccesstothatsupply.AndwhereasbeforeHomeAwaywaspartofthefamily,wedidn'thavesignificantaccesstothatsupply,andourgoalwastobuildoutthataccesstosupplyonanorganicbasis.NowthatHomeAwayispartofthefamily,wehaveaccesstothatsupply,andwewillcontinuetobuildaccesstothatsupplyonanorganicbasis.
SowethinknowthatHomeAwayispartofthefamily,theAirbnbeffectisgoingtobeapositivefactorforus.Butit'sveryearlyinthisevolution,andatthispoint,otherthanthosespotcircumstanceswhenmarketsarekindofsoldoutbecauseofbigevents,we'renotseeingitaffectourspecifictrends.
KevinKopelman (Analyst-CowenandCompany):
Thanks,Dara.
Operator :
JustinPattersonwithRaymondJames.
Just inPatterson (Analyst-RaymondJames):
JustwantedtotouchonTrivago.Appreciatethedisclosuresyougaveearlieronthecallonthematuremarketsversustherestoftheworld.Couldyoutalkabouthowyouarethinkingofreinvestingintherestoftheworldandwhenweshouldseethatgrowthratestartcreepinguptothecontributionmarginofthematuremarkets?Thanks.
DaraKhosrowshahi(PresidentandCEO):
Sure,Justin.Listen,it'shardtogiveyouprecisenumbersaroundtimingofwhenwemightexpecttoseebettercontributionintherestoftheworld.Thisisabusinessthatoperatesonaveryquickcycletime.Weinvest,weseereturns.Whenweseereturnswelike,wecontinuetoinvest.
IthinkthebigchangethatwillultimatelydrivebetterrestofworldcontributionistheultimatepenetrationormaturityoftheUSbusiness.That'sanabsolutelyhugebusinessnowforTrivagothatisstillgrowingverystrongly,andtheycontinuetoseepocketsofavailabilitytoinvestintotheUS.
Atsomepoint,overthecourseofthenextthreeyears--maybeit'sthisyear,maybeit'stwoyearsfromnow,maybeit'sthreeyearsfromnow,thatmarketwillgetsobigthattheyarefullypenetratedanditdoesstarttolook,fromaprofitabilityperspectiveanyways,liketheirmorematuremarkets.Butatthispoint,it'sreallytoodifficultforustogivethecoloronwhenthatisgoingtohappen.
DaraKhosrowshahi(PresidentandCEO):
AndIjustwanttounderlinewhatMarkwassayingasfarasthedecision-makingfortheCompany.Ifyoulookatourtechnologyinfrastructureandourupgradertechinfrastructure,fromadesignelement,we
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
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weregoingfrommuchmoreofa,callit,batchdatadesigntoreal-timedesign.Batchdatacomesin,goesintosomedatawarehouse,analystscomeinandanalyzeit,adecisionismade,andbasedonthedecision,youtakeactions.Real-timeisthereisatotalflowofdatacomingin.Youareanalyzingthedataonareal-timebasis,andyoumakedecisionsreal-time.
Andthatsameidea--thattechdesignideaissomethingthatwearetakingtoourbusiness.Andwearemaking--wedon'twanttobemakingadecisiononTrivagomarketinginvestmentbasedonsomethingthatsomeoneputonapieceofpaperaspartofanannualplan.Becausethenthepaperiskindofrunningyourbusiness.Weareinstrumentingourbusinessessothatwearemakingtherightdecisiontomorrowandthedayafterandthedayafterandthedayafter.Andwhatevertheresultisthen,that'sanoptimizedresultforrealbusinesspurposesandforthepurposesofourinvestorsthananoptimizedresulttohitanumberonapieceofpaper.
Wetakeourguidance--annualguidancewithyouseriously,buttherearealotofdifferentadjustmentsthatwearemakingwithourbusinesses,andwemakethoseadjustmentsreal-time.Wedon'tmakeitbecausesomeoneputatargetonapieceofpaper.
Just inPatterson (Analyst-RaymondJames):
Gotit.Thankyou,Mark.Thankyou,Dara.
Operator :
DanWasiolekwithMorningstar.
DanWasiolek(Analyst-Morningstar):
Justwonderingwhatpercentofyourtotalbookingsarecomingviadirectandmaybehowthat'strendedoverthelastyearandanycommentaryonhowyoumightviewthattrendingoverthenextfewyears?Thankyou.
DaraKhosrowshahi(PresidentandCEO):
Yes,thanksforthequestion,Dan.Carefullyguardedinformation,butI'llgiveyousomedirectionalcoloronit.Oneisthat--obviouslyaswehavebuiltthesebigloyaltyprograms,bothatHotels.comandatBrandExpediaandcertainlyOrbitzhashadthisbenefitaswellwiththeirOrbucksprogram,youdobuildonyourdirectbusiness.That'soneofthecorestrategiesofhavingthoseloyaltyprograms.
Soasthoseprogramsmatureandtheyaregettingbig,wedoseeanincreasingamountofourbookingscomingdirect.Sothat'sthefirstoneI'dmake.
Secondly,isinourmaturemarketsliketheUS,wedoseeasignificantamountofourbusinesscomingtous--directdirecttypeinrespondingtoemailusingtheappforexample.Andinlessmaturemarketswherewedon'thaveestablishment,thevastmajorityoftrafficactuallycomestousfromvariablechannels,andthegoalisovertime--andwedothisasweenternewmarketsandastheymatureovertime--istoacquirethesenewcustomersandhavethemturnintorepeatcustomersandbuildthebusinessinplaceslikeVietnamandKorea,forexample,tolookalotliketheUS.
IthinkDarahadmadesomecommentsoverthecourseofthelastcoupleofquartercallsthatoneofthetrendsthatwehadseenisthatthegrowthratesofourdirectchannelsandthegrowthratesofbookingsfromourindirectorvariablemarketingchannelswerestartingtogetclosertogether,andIthinkthat'satrendthatwehadcontinuedtosee,andwearehopefulthatissomethingtocontinueoveralongperiodoftimeaswebuildtheseloyaltyprogramsandasourinternationalmarketsmature.
CompanyName:ExpediaIncCompanyTicker:EXPESector:ServicesIndustry:Leisure
EventDescription:Q42015EarningsCallMarketCapasofEventDate:12.68BPriceasofEventDate:102.38
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DanWasiolek(Analyst-Morningstar):
Okay.Thanksforthecolor.
Operator :
Atthistime,Iturnthecallbackovertoourspeakersforanyadditionalorclosingremarks.
MarkOkerstrom(EVP,OperationsandCFO):
Thanks,everybody,forjoiningustoday.Dara,doyouhaveanyclosingcomments?
DaraKhosrowshahi(PresidentandCEO):
Yes,justagreatjobtotheExpediateamonaworldwidebasisand,inparticular,theteamsthatareworkingontheOrbitzmigration.It'salotofwork,weappreciateit,andabigwelcometotheHomeAwayteam.
Sothankyouverymuch.Lookforwardtoanexciting2016.Thankyou.
Operator :
Thatdoesconcludetoday'sconference.Wethankyouforyourparticipation.
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