Good day, everyone, and welcome to the Expedia Group Q1 2022 financial results teleconference. My name is Jason, and I'll be your operator for today's call. If you wish to ask a question at the end of the presentation, please press Star followed by one on your telephone keypad. If you change your mind, please press Star followed by two. I will turn the call over to our IR director, Jon Charbonneau. Please go ahead. Great. Good afternoon, and welcome to Expedia Group's financial results conference call for the first quarter ending March 31, 2022. I'm pleased to be joined on the call today by our CEO, Peter Kern, and our CFO, Eric Hart. The following discussion, including responses to your questions, reflects management's view as of today, May 2, 2022 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 or confident that, or similar statements. Please refer to today's earnings release and the company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on the company's investor relations website at ir.expediagroup.com. I encourage you to consistently visit our IR website for other important information. Unless otherwise stated, any reference to cost of revenue, selling and marketing expense, general and administrative expense, and technology and content expense excludes stock-based compensation. With that, let me turn the call over to Peter. Thank you, Jon. Good afternoon, everybody, and apologies in advance. Eric and I are both recovering from a cold, so our voices may not be as loud as normal, but we'll do our best, and please ask for clarification on anything you can't hear. Let me start by saying we were pleased with the quarter. We continue to see strong demand coming back. We continue to see efficiencies in the business. In general, it pretty much had the shape we expected, which is to say that we went into the quarter with Omicron looming. Last quarter, we mentioned that we expected that to have some impact early in the quarter, which it did. You know, we're very pleased that demand came back post Omicron, and Omicron lived up to sort of our expectations, which were that it would be the shortest wave, it would be the least impactful. I think as we now go into BA.2 and other things we're seeing, that it's really hard to even detect the blips anymore. That's great to see. We also then were hit with the war in Ukraine, which did have some impact on the EMEA markets. Again, the consumers seemed to absorb that information, and now EMEA is back to its highest levels since COVID hit. Again, we've seen these impacts, but in each case, a recovery that seems too strong to be held down. The recovery's been strong and nicely, we have seen it beyond just domestic travel, which of course had been the bright spot for a long time during COVID. We're now starting to see city business pick up, business travel pick up, international travel vectors pick up. I would say broadly, while some geographies lag, all geographies are, in general, growing and returning. Despite the usual caveats for COVID, now we have rising inflation to worry about, and of course the geopolitical situation. The pent-up demand that's out there for travel seems to be outweighing anything the market can throw at it, and we continue to be feeling very good about a summer recovery that should be very robust. As I've said before, we've been spending into that recovery, particularly with an eye towards driving long-term customer engagement, finding the right customers, having the right mix of marketing to attract direct and long-term valuable customers. With an eye towards lifetime value, we are investing into that strong recovery and will continue to do so. As an example, our teams have done a great job of driving Vrbo and app downloads. Vrbo, according to our third-party data from a company called Sensor Tower, was the number one downloaded app in North America in the first quarter of the year, and that's a place where we've had emphasis. Obviously, our emphasis will change through the year, and we'll push into our other brands as well. App particularly is a place where we feel like there's a lot of long-term customer value. We're improving that product dramatically, and we think that's a great place to put capital right now. Importantly, our direct-to-consumer business is only part of the business, and we have our big EXPLORE event coming up over the next few days in Las Vegas, where I am right now, and I'm pleased to say it is packed and business seems to be booming at the hotels. That event is with our business partners, as with all our supply partners, as well as many partners with whom we drive demand. I've talked about this a little bit before, but we have a thriving B2B business. I haven't spent a lot of time on it, but this is the week where we will now come out and display all the work we've done to reimagine the future of our business and our place in the travel ecosystem and what we've been doing for the last two years. We're gonna share that with our partners with a general focus on overall travel experience. How we're rethinking our marketplace and how our platform technology will not only drive our B2C business, but will enable our partners to do much more with their own businesses. Even though I haven't spent a ton of time talking about it, I just want to reframe that our B2B business is a terrific business, was before COVID, remains a strong business, and we've made a lot of progress during the time of COVID to continue to expand that business, including one example, which is Optimized Distribution, which I think I've touched on before, but this is a product that we started in partnership with Marriott. We now just had IHG join this year, so two of the largest global hoteliers in the world, as well as many others testing on it. What it does essentially is it cleans up the wholesale business for these partners. Wholesale rates have been a huge issue in the metasearch universe. They get bled out into the world and then find their way back into meta, and they end up hurting hotel companies because there are prices out there that are under the brand.com prices. We created technology to thwart this and basically help our partners get the same B2B business and more in the wholesale markets, but do it in a way where their prices would be protected and they'd make sure they weren't undercut by their own prices out in the world. It's been a hugely successful program for Marriott, now IHG again, and we hope many more partners will take advantage of the technology. That's just one example of the many things we are working on. I've talked about externalizing our technology before. We've had a white label template in a lot of ways where our partners can sell other products. We have airlines with whom we power packages and hotel paths. We recently added Delta to power their car path. We've expanded our offline travel agent business and our share of wallet with our API partners. It's a great business. We see expansion for it. As we'll talk about a lot more this week at Explore, we have a lot more ways we think to help our partners and expand the addressable market there. As we move into that, we will continue to accelerate innovation in our platform, and that innovation will drive not only our B2C business, but also our B2B business. That's why we're so excited about how we're rebuilding our platform. All in, we expect 2022 to show continued recovery. We expect a robust summer. We expect to continue to drive efficiencies through the business. The real work this year is on delivery, on delivering on the brand work we've done, which looks great so far. We're rolling out new Hotels.com brand work right now. I think the brand teams have done remarkable work. We've got a lot of new product innovation coming this year, and we're doing a ton of work on the back end platform. All of those things will be rolling out this year, and we'll have some impact on this year. Really, the impact is much longer term, and we see great things ahead as those products all get delivered. With that, I hope all of you can join us at EXPLORE. It's going to be a great event. Our team has worked their butts off to put on an amazing event for close to 3,000 partners who are here. If you can't make it, I invite you to watch the streaming, and it should be really exciting. It's a chance for us to really display the work our teams have been working on for the last two years and all the painstaking time and effort they've put into changing our direction for the future. With that, I will leave it there. Great. Thanks, Peter. Thanks, everyone, for joining the call as well. While the first quarter did have some volatility, travel demand has proven resilient, and I remain optimistic around summer travel, as Peter mentioned as well. With that, I'd like to start by reminding everyone this is the first quarter without any direct contribution from the Egencia business. As a reminder, we completed the sale of Egencia to Amex GBT on November 1st, and our EPS business entered into a 10-year lodging supply agreement with Amex GBT. I'll provide certain growth rates excluding Egencia, which also excludes any contribution from the Amex GBT deal in the first quarter. These pro forma numbers are intended and included to give you more visibility into the recovery, our recovery, and also our financial performance. Shifting now to bookings. Overall for the first quarter, total bookings for all products net of cancels were down 17% versus Q1 2019 or down 11% excluding Egencia. This was a sequential improvement versus the down 25% we saw last quarter. Vrbo performed well during the quarter and continued above 2019 levels, and our hotel business is rebounding with city and international travel coming back. While air has still lagged lodging in the recovery, we saw improvements throughout the first quarter, which held in April. Again this quarter, we're going to provide more details into our monthly booking trends. Our total lodging bookings net of cancels, which includes hotel and Vrbo, was down 11% in January versus 2019, up 8% in February, up 7% in March, and up approximately 10% in April. Now on to the P&L. Total revenue was down approximately 14% versus first quarter 2019 or down 10% excluding Egencia, a slight improvement versus the 17% decline we saw last quarter. On sales and marketing, direct spend in the first quarter was roughly $1.2 billion, down 6% versus first quarter 2019 levels compared to the 12% decline last quarter. As we've mentioned, and as Peter mentioned a few minutes ago, we will continue to spend into the recovery into Q2. Moving on, overhead costs excluding Egencia were up approximately $13 million versus fourth quarter 2021. Looking ahead, we expect the higher than normal annual compensation increases discussed last quarter, which took effect on April 1, will result in a notable sequential step up in overhead costs in Q2. In total, Adjusted EBITDA $173 million, roughly flat versus 2019 levels, despite revenue still down 14%. Excluding Egencia, Adjusted EBITDA grew 14%, which suggests we are much more fully recovered than you can see from our reported numbers. On free cash flow, excuse me, totaled roughly $2.8 billion in the first quarter on a reported basis. Excluding the change in restricted cash, which is primarily driven by the change in Vrbo's deferred merchant bookings, free cash flow was approximately $1.9 billion. In terms of the balance sheet, we are committed to our investment-grade rating, reducing leverage, and further reducing our cost of capital. We continue to take important steps toward this, and as announced last quarter in March, we completed the early redemption of our EUR 650 million bond. This follows the full repayment of our preferred stock last year, and in total, we have repaid over $1.9 billion in debt since last May. If current trends continue, we will actively look to further reduce leverage moving forward. Recently, we also entered into a new $2.5 billion revolving credit facility, which was a real positive outcome for the company. When compared to the old credit facility, it added $500 million in liquidity to the balance sheet and removed many of the restrictions we had been operating under during the pandemic. Overall, I'm pleased with the financial performance in the first quarter and remain quite optimistic about the recovery heading into the summer travel season. With that, we are ready for our question queue. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason you'd like to remove that question, press star two. Our first question comes from Eric Sheridan with Goldman Sachs. Please proceed. Thanks so much for taking the question, and hope you both feel better from being under the weather. Maybe too on the marketing side of the equation. You know, longer term, you guys are moving towards trying to align marketing dollars towards more brand, more direct to consumer. Can you give us an update on the progression you're making there, beyond just the summer travel season in 2022 and how to align those marketing dollars where you want for the longer term? That would be number one. Number two, when you see things like the mobile app side of the business continue to take off, how much increased confidence do you have in being able to mine the element of activity we're seeing ahead of summer 2022, to again create higher ROI loops in 2023 and beyond? Thanks so much. Yeah. Thanks, Eric. I'll take the first one first, which is, yes, we believe we can drive over time more efficient return on our marketing dollars, and we do believe that places like brand and app present real opportunities. The main idea is that we're trying to find and mine the best veins of long-term return. I think, we and the industry has been very transactionally focused, and we haven't been great historically at measuring lifetime value and the different value of different customers coming in through different channels. We are getting much better at that and finer at that, and we will look to build, you know, the long-term high-value customer base that has the repeat characteristics and the high lifetime value that we wanna drive, as opposed to just chasing transactions and hoping the rest takes care of itself. I think that's really the change. Many of these areas offer opportunity. I mean, brand, we've always spent a lot on brand, but I would argue not always with the best creative, not always with the greatest impact, not always with a clear message. We're getting much better at that as you know, the people we've added are driving you know, great product there. Likewise, you know, we have to improve the product, which goes to your second question, which is the higher ROI is really about not only bringing people in through the right channels, but it's also having the right engaging product. All the work we're putting in to create you know, a new app, which basically will be largely new over the course of this year, and a number of other things we're doing to engage travelers. We're announcing a couple of new product features coming out this week at our event. We're trying to create much higher engagement. Obviously, we prefer it be through the app, all things being equal, and then we can drive all those other channels. We'll spend the money where we think we're getting the greatest return, and we're driving those people into the right product. It's hard to say where it's going to balance out. I would say until we get to more normalized times, it's really hard to get a perfect read as compared to history in terms of percentages spent on X or Y or Z. I would say our mindset is that we're looking for those veins, including app and many other things, where we believe we are driving the type of customers and acquiring the type of customers that drive long-term value into the business. That's our approach. Yeah. Just to add, this is Eric speaking. Just around, Peter mentioned the concept of the improved quality and performance on the brand spend side. There's also with a clear value proposition, product that delivers against it, and then the third prong that I would add to it as well is around our loyalty program. We previously announced that we'll be launching that loyalty program. These components then come together because ultimately, we can acquire the customers, give them a great experience, reward them for building a relationship with us. Create an ongoing dialogue with them through that loyalty program. That's obviously some of those components are still in development and relaunch. That's another component as we move forward that we're excited about. Great. Thank you. Thank you. Thank you for your question. Our next question is from Lloyd Walmsley with UBS. Please proceed. Thanks. Two, if I can. First, just, you know, sticking on the marketing theme, what is the, I guess, the latest update on the effort to consolidate the marketing data and operations? You know, are you finished the operational part of that effort? Any further clarity around the opportunities to drive better marketing returns at some point from just a more coordinated effort across brands? Second one, you know, you talked about the cost step-up in overhead. You guys have flagged that last quarter as well. But can you help us understand how to think about that kind of fixed cost inflation rate? What is that on a kind of annualized basis, and how does it flow into the P&L in 2Q and for the rest of the year? Thanks. Yeah. Thanks. Thanks, Lloyd. I'll take the first one, and Eric can take a crack at the second one. On the consolidation, we're a long way along in actually bringing together the data ops, algos, and everything that goes to drive performance marketing. There's a long tail, obviously, 'cause we're in lots of geos and lots of places that, excuse me, aren't terribly impactful economically, but you know, over time, we wanna get much better in. I would say, you know, we're a long way through that. As I mentioned before, you know, getting that operationally right is great. Now we have to test a lot of things to get the benefit you're referring to, which is how do we optimize for multi-brand? How do we optimize in different geos, et cetera? The big heavy lifts, I would say, on the, you know, the 80/20 rule, we've gotten the big stuff. Now it's really about, you know, moving those tests through as I just mentioned, you know, finding these new veins, testing all these new veins. That's the critical work. Right now, you know, we're seeing a lot of demand, and we wanna drive growth, not just to, like, historic levels with better margins, but, you know, higher growing levels with better margins too. We want to invest into growth and if we see the opportunities with the right returns, we will do that. I think we can drive better returns and better growth, and that's the goal. Again, the shape of the curve may change a little bit as we invest into these high value, lifetime value, veins of opportunity, but we... You know, we have the operational side, I think, a long way along. It's not perfect yet, but it's a long way there. Now it's just about testing everything and getting sharper on the readouts. Of course, you know, these are not exactly normalized times yet, so some of the data is still, you know, there are places in the world where we can't test yet because the recovery is not sufficient and so forth. So it'll take us some time, but I think the big part of it's behind us. Lloyd, thanks for the question. I'll take the second part of it. No worries, Peter. I'll take the second part of it, but thanks again for the question. Again, we're not gonna get into any specifics on how they'll necessarily flow through, but hopefully a couple of framing will help you guys as we move forward. Just the first one is around the annual wage increase. Again, just as a reminder that is coming into or went into effect on April first, so that will impact the second quarter. What I would do is I would go back and look at previous increases that you've seen us flow through in similar timelines in the past. As we mentioned on the call, there is a step on wage increases relative to prior years. In effect, I would go and look at what that step-up was, gross it up, if you will, and then take that throughout the year. Secondly, we talked about this a bit last quarter as well, which is our hiring in Q4 was slower than we anticipated and would have liked. We did see some positive momentum in hiring in the first quarter and project that continuing in 2022 as well. You know, from an overhead perspective, I suspect that there will be some increases as we go through the year as we wanna invest in our technology platform product and other areas of the business as Peter has mentioned. Those are the two primary components that I would call out and the relative timing for the wage increase. Hopefully, that's helpful to you, Lloyd. Okay. Thanks. Hope you guys feel better. Thank you. Thank you for your question. Our next question is from Kevin Kopelman with Cowen and Company. Please proceed. Great. Thanks a lot. Could you give us some more color on Vrbo and how it's trending as the year goes on, and maybe touch on the supply of Vrbo and how that's growing, if you feel supply constrained? Thanks. Yeah, sure. As Eric mentioned, you know, Vrbo remains nicely above 2019 levels. We are somewhat supply constrained. We will certainly sell out of many of our top locations for this summer. We're already seeing that. That is where our focus on supply has been, to add supply in the markets where we know we're most constrained. That's been, you know, really good in terms of when we add supply, we know we can move it and our suppliers get great outcomes and everybody wins. We haven't had as much focus, though we are turning our attention to that now, of the broader overall supply gains. Again, we're gonna stick to what we do well, which is whole home vacation areas, you know, not compete. You know, we're not gonna pivot and go after cities except if they're, you know, vacation cities essentially. We're sticking to our, you know, our main product line here and what we know works and what we know our travelers want. I would say the answer is yes, we are a little bit supply constrained. We could certainly move more supply in our most high-demand markets, but that is where our focus on supply has been, and we are kind of gearing up the machine more broadly to go after not just that, but more broad supply in places where we think it will now come back more globally. Great. Thanks, Peter. A quick follow-up if I could. Looking at the lodging recovery, it's been pretty stable, improved a little bit February through to April. Underneath that, are we seeing Vrbo seasonality play out in that, or is it just that it's just been pretty stable? Yeah. I would say Vrbo has been, you know, relatively stable. You know, there's been some funkiness over COVID with month-to-month, where demand has been high in a certain area 'cause of where the waves were and other things. I would say broadly, Vrbo's performance has been strong. You know, we're seeing lots of new customers come into the product. I think the first quarter we were around 50% of it was new customers. We're getting a lot of, you know, new customers, we're getting a lot of repeat and, you know, we're building that base of customers who have had great experiences with the product. I think, you know, we feel like that will continue. Obviously, you know, as hotel comes back more strongly, that's, you know, another mix factor that will potentially change, where the strength is, but we think Vrbo will stay strong, just hotel will get better. Great. Thanks, Peter. You bet. Thanks. Thank you for your question. Our next question comes from Deepak Mathivanan with Wolfe. Please proceed. Great. Thanks for taking the questions. First, just, Peter, wanted to ask a little bit more about the last questions. The cadence of accommodations bookings, you know, seems like somewhat flattened out between March and April, around like high single digits, low double digits. I'm curious any additional color you can add to that, maybe geographically or, maybe something specific. Secondly, kind of related to that, you know, wanted to ask you how you think about the travel demand sensitivity to, you know, consumer spending levels and maybe other macro variables. It clearly doesn't seem like it's an issue right now, but how do you think and even plan for second half, you know, if cyclical trends start to become more impactful? Yeah. I mean, so far. Let me take the second one first, Deepak. I'd say so far, notwithstanding what we all read about or watch on CNBC, so far the macroeconomic environment has not appeared to have a noticeable impact on the recovery in travel. You know, we could all make our hypotheses about people having had lots of savings during COVID, you know, been underspent in leisure and hospitality. But, you know, people are spending into it, and our general assumption right now is that that will continue and that, you know, perhaps as things get, as people feel the impact, they may downscale what they're trying to do for a holiday or go to a cheaper alternative, but not that they won't travel. We expect that demand to continue. Obviously impossible to say long term, you know, what happens with inflation and everything else, but, and obviously, that could have an impact on ADR, but ADR, particularly in the middle and upper end of the market, continue to be really, really strong. There's no noticeable like, "Oh, that's something really pivoted in the last few months." Of course, long term, it's hard to say. As far as bookings flattening out in April, you know, it's again challenging to say with the ups and downs of the various travel factors and what's going on in the world. We don't think there's much to be read into that. I think we feel good about where April is. It continues to show relative momentum, and we expect that to continue through the summer. I wouldn't, you know. At least we're not reading much into that right now. It's been bumpy all the way along, ups and downs and I think, you know, holidays and other things start to impact and back to work is starting to impact things. You know, we'll see in another quarter, but I don't think that's, you know, suggests anything that makes us, you know, perk our eyes up or get concerned. Deepak This is Eric. Yeah. Hey, Deepak. You used the word planning, so let me respond to that just from a planning perspective. Yeah. Generally, as you think about our marketing spend, a large percentage of that, of course, is on the performance or variable marketing side. We now have instrumentation, which we've talked a lot about, that allows us to see on a real-time basis what that demand footprint is looking like, what the CPCs are looking like, where we can allocate capital across the different performance channels, different geographies, et cetera. Ultimately, we have the ability to see it in real time and ultimately make capital allocation decisions based on what we're seeing. Of course, brand spend is a bit more batchy. At this point, what we're seeing and everything that Peter just walked through, we continue to be optimistic about the summer and beyond at this point. If that changes then we'll adjust how we think about investing in marketing if we need to. I guess maybe the last comment is we've dealt with a lot of volatility before over the last few years and built a lot of this implementation based on that. If things get more volatile, we're in a position to make appropriate decisions in real time. Yeah. No, makes a lot of sense. Thank you so much. Hope you both feel better. Thanks. We will. It's what happens when you start traveling again and shaking people's hands, you're bound to get a cold. Thank you for your question. Our next question is from Naved Khan with Truist. Please proceed. Yeah. Thanks. Thanks a lot. I just wanted to dig a little bit into the commentary on the new users on Vrbo. I think, Peter, you mentioned roughly 50% of the bookings came from new users or 50% of the users were new. I'm just trying to figure out how are you acquiring the new users? Are these through word of mouth or are these primarily through performance channels? Just any kind of color or commentary would be helpful. The second question I had is just on the return or at least the improvement in urban and cross-border and business travel. Just maybe can you give some sense of how the bookings in these sub-segments kind of compare versus 2019 levels? Yeah, sure. Thanks, Naved. First on Vrbo, I would say, remember that we largely pulled out of performance in North America on Vrbo. We still use it in some other markets, but it's not generally coming through performance marketing, it's coming through direct channels. But as you know, we've spent up considerably in brand marketing on Vrbo. We were in the pregame show for the Super Bowl. You know, we've been aggressive there. We've been aggressive in app marketing and some other vectors. I think we've done really nicely there, and the team's been very effective in that. You know, again, I think Vrbo is becoming. As it has grown and grown through COVID, it's just become more of a known animal. The brand has landed finally, which, you know, the initial work on that three years ago was maybe not as good as it could have been, but over the course of COVID and with the benefit of better, bigger spending, you know, we've done really well with it. I think we're just, you know, riding the momentum of all that good work. As far as the return of urban and cross-border travel, I would say it's all directionally, you know, up and to the right in varying degrees. Big cities remain still considerably below where they were, but, you know, moving in the right direction and we're seeing those recoveries coming back. We're, you know, seeing some of the booking trends for summer in terms of big international, you know, city destinations, holiday destinations coming back. Cross-border out of North America has now recovered above 2019 levels. Again, that's not true for everywhere. It's not true for EMEA yet. It's not true for some other places, but certainly for APAC. But all markets are generally up and to the right, and all products are basically up and to the right. Just depends how far behind kind of they started. Business, big city, still a ways behind, but coming back. I think international will be the first to break out and, you know, come back to historic levels and then we'll see the other two categories follow. Great. Thank you. Yeah. Of course, international, you know, is good for us. That's a market both in the U.S. and in EMEA where we tend to over-index. Understood. Thank you for your question. Our next question comes from Mark Mahaney with Evercore. Please proceed. Okay. Thanks. Two questions, please. First, just, we haven't mentioned IDFA on this call, so just any quick commentary on whether you the efficacy of your app marketing campaigns and whether you think you're back to parity or wasn't a major issue for you in the first place. Then, I think, Peter, you talked a lot in the beginning about the B2B opportunity. I think you clicked on it a little bit more than you typically do. Can you just spend a little bit more time on helping us size that opportunity for Expedia, you know, versus the core market that you've been in? Just talk about the relative attractiveness of that opportunity. Thank you. Yeah. Thanks. First off, easy one on the first one. It hasn't been a major issue for us. You know, we weren't probably where we wanted to be in app marketing before. Now we're in a much better place. We've been much more effective and so far IDFA has not had a material impact on it. You know, we're ahead of where we were historically, so hasn't been an issue for us. On B2B, you know. Thanks for the question because it's my favorite topic. You know, I think this is an area of our business that's been underrated by the markets, and is an opportunity for a significant opportunity for us. You know, we've talked about it before, but we power many of the biggest financial institutions in the world and their rewards programs where they have travel. We power things like AARP membership travel, all kinds of things like that. We have a huge base of offline travel agents, of regional players in regions where we don't play with our brands who we power, and on and on and on. There's a bunch of interesting opportunities in Fintech and other areas that are coming online. We've had this traditional business which has been about templates, about giving people the access to our supply so they could sell it. Imagine, you know, an airline sells a package with a hotel, et cetera. You know, we're driving that hotel in that package very often. There's all kinds of that business that's been out there, but historically we've only been able to do it for the largest partners because it took a lot of bespoke work to get the integrations to work. But what's really exciting and what we're all excited about is we're rebuilding the platform now in a way where it will be much more self-service, much more able to go for the biggest down to the smallest partners, so that anybody who wants to be in the travel business or any of our partners who wanna sell incremental products or use our technology to drive incremental benefit to their business will be able to access it. We think that's really gonna dramatically enhance the potential size of the market. We have to deliver it. You know, there's a lot of work still to do, but you know, every day as I talk about Optimized Distribution, you know, we have more and more partners coming onto products like that. These constitute really significant opportunities for us broadly in that 2019 our B2B business was, you know, very sizable. I don't think we broke it out, but it was significant and measured in the many, many billions of dollars of GBV and we see the opportunity to grow that significantly over time. I would say, you know, we think our B2C business will accelerate beyond where it was growing historically, but we think the B2B business will accelerate even faster and will outgrow on a percentage basis the B2C business for the next several years, many years. Okay. Thank you, Peter. You bet. Thank you for your question. Our next question comes from Justin Post with Bank of America. Please proceed. Great. Thank you. A couple questions on your monthly growth rates. If I average the first quarter, it's around 1 + or 2% for lodging, and I think the total is -11%. So let's call it a gap 12 points or so. I think it's been somewhat consistent for the last few quarters. Can that gap start to close as air recovers and what other drivers are at that gap? And then the second question, you know, looks like growth is pretty stable on a monthly basis for the last three months. I guess I would expect a little bit better as international reopens. How do the comps look going forward from here over the summer? Thank you. Yeah. I'll take both of those. On the first one, yeah, the way that you're doing the math is right. It illustrates that on the kind of GBV line that not all products have recovered at the same rate. Air does continue from a recovery standpoint to lag for us. We have seen an acceleration, however, in air. Peter went through a lot of the different intersections or vectors. I would add air to that one as well. We have seen that to start to recover as well. It does hit a number of the intersections that are still call it behind where we've been benefiting from for the last few quarters, which of course are U.S., Vrbo, et cetera, et cetera. Over the course of the year, would expect for that to trail as air continues to come back, as there are more planes in the air, as there are more international flights, et cetera. There's some headwinds there, as we all have heard from the airlines around staffing and other associated issues. I would say air is the primary driver, as you pointed out. On the comps for the summer, I would say there's nothing particularly that I would call out. Obviously there are a few months there where, depending on which year you're comparing against, Vrbo had some particularly strong months in a row if you go back to 2021 or even back to 2019. From a comps perspective, I think there's nothing I would. Great. Thank you. Thank you. Thank you for your question. Our next question comes from Tom Champion with Piper. Please proceed. Hi. Good afternoon. Just curious if you could talk about international travel a little bit more. Domestic has entirely exceeded 2019 levels on the revenue side for domestic travel. Just what do you think is kind of an appropriate timeline or pace of recovery to get back to pre-pandemic levels on the revenue side? Eric, I'm wondering if you could talk a little bit more about the balance sheet. It sounds like debt reduction is your focus for now, but just curious if there are any thresholds to keep in mind that you're looking to achieve before you shift back to buybacks or another use of cash. Thank you. Yeah. Yeah. Thanks, Tom. On the international front, as I mentioned, you know, we're already seeing. For example, out of North America, international levels have recovered above 2019 levels, at least on a dollar volume basis. You know, but again, it is driven market by market. EMEA trails that, APAC's far worse, and LATAM's in between. You know, the trajectory of when it's all back and what does that, what are the, how does that comp over, you know, a normalized pre-COVID year, you know, is guesswork having to do more with COVID than anything else. I think, as we've seen before, the bigger travel markets in the West have buoyed, you know, the category and particularly for us since we're concentrated more there. You know, I think we could easily get to pre-COVID, you know, international levels of volume and dollar volume before the whole world recovers, but it's a little hard to predict because without the whole world recovering, you know, other areas have to over-index. Right now we feel good about it. I mean, NORAM's our, you know, our home market and it's great that it is leading the charge. Obviously, to really comp to prior periods in totality, we could use the rest of the world coming back a little more. I expect, you know, it's entirely possible that by the summer we could be at levels, you know. Again, mix would be different, and some of it would have to do with dollar volumes and ADR, but we could be at levels above where we were in 2019. Yeah. On the second part of your question, thanks for the question, Tom, around the balance sheet. I think you should assume and also have trust in that we are having that conversation regularly when it comes to our balance sheet, our cash position, our debt position, and ultimately returning cash to shareholders in one form or another. As mentioned, I know numerous times, as the investment-grade rating is important to us, we're committed to sustain investment-grade, that does require us to delever just to where we are right now and also from a contracting standpoint of reducing our interest expense. As we do that, we are then also contemplating what other capital returns would look like, but don't have anything to announce necessarily today. To guide you on the milepost or whatever the term that you used, you know, we're currently at 4.5x trailing EBITDA from a leverage perspective. It's a bit different on our current leverage ratio for our revolver, but you know, that's our sort of headline number. If you look at our historical level of leverage, that was around 2.5x. I wouldn't necessarily state that 2.5 is a clear marker, if you will, but that is certainly the order of magnitude that we're looking at from a get our debt down, get our debt leverage ratio down, as that I think opens up the opportunities for capital returns in other form. Also remember that there's two primary ways that we can get that leverage ratio down. One is paying down debt, which is something that we are actively thinking about and setting this, growing into it from an EBIT standpoint. We do expect EBITDA to be robust as we get into this year, as we get more fully recovered. If trends continue, then we're certainly gonna look at improving our ratios in this area to open up some more options for us over time. Thank you both. Thank you. Thank you for your question. Our next question comes from Lee Horowitz with Deutsche Bank. Please proceed. Great. Thanks for the question. Too, if I could. It kind of strikes us that the U.S. hotel business has grown increasingly competitive kind of through COVID and in recent months. I wonder if you can comment at all on what you're seeing from a competitive standpoint in the U.S. specifically, say now versus the pre-COVID environment. Then maybe on take rates, you know, with take rates this year being a function of both the pace of the overall industry recovery as well as the relative recovery rates of some of the products that we've talked about at this point, how do you think about how take rates may evolve in 2022, say, relative to the, you know, levels we saw in 2019? Thanks so much. Maybe I could ask you, Lee. In your first question, are you asking competitiveness between us and other players or the competitiveness between hotels? I'm not sure I understand the question. Oh, no. I guess between you and other players within the U.S. hotel market. Yeah. I mean, look, I think as we've talked about before, our main competitor has been highly aggressive. This is obviously a market where we are relatively dominant and they want more of the business. We've talked about how COVID and the kind of changes in demand patterns were helping them and hurting us in terms of you know long tail properties in smaller markets as against our relative strength in big cities and international travelers, etc. You know, they're certainly focused on it and competitive. You know, we always watch what they do. I think we feel pretty good about our opportunity to continue to grow in the U.S. Obviously we expect them to compete hard, but you know, it's our home market and we're strong here, and we think we have the tools we need to be competitive. When demand patterns return to more normalcy, I think you'll see you know, that they were pretty much you know, where we were. You know, we may each make slightly different choices about where we think the long-term value is in customer base, but you know, there's not really something to see there from our perspective right now. In terms of take rates, you know, all I can say is that we've renewed a lot of deals throughout COVID. You know, they've been good renewals, not big fights, and our take rates have been pretty consistent and held. I think there's no, "Oh, you know, the sky is falling, so we can't pay anybody." Equally, you know, I don't think it's going the other way. We're also building in more opportunities in places like air and things like that, where we think there's opportunity to help our partners sell more premium products, sell ancillary products with their air tickets. You know, we historically have not really been able to sell things like seat assignments and bags and other things. Now that increasingly we are direct connecting with airlines, we are now able to sell those things. Actually at EXPLORE this week, we'll have a demo of a new product that, you know, we use to help shoppers shop smarter, and pick the right product for themselves, and it's helping drive more premium products and attach rates. We have a lot of opportunity to do better there. We got to make it happen, but I think in terms of the core deals with our partners, I think we're in fine shape. Yeah. Just to add a quick comment on that. Great. Great. Thanks so much. Just a reminder that Q1 take rates tend to be our seasonal low for the year. I think you can see that in Q1 relative to Q4 and some of our historical numbers. As you're modeling, just ensure that you're taking a look at the seasonal curve that we've experienced in the past and expect that curve to be similar this year than it has been in the past. Thanks so much. Thank you. Thank you for your question. Our next question is from Brian Nowak with Morgan Stanley. Please proceed. Great. Thanks for taking my questions, guys. I have two. Appreciate the color about the monthly bookings trends versus 2019. Was wondering, because there's a lot of investor questions about this. Could you just help us understand a little bit where the core hotel business bookings trends are versus 2019 even, you know, versus those 11, eight, seven numbers you gave, just so we have a better, a rough idea of how that business is doing through Vrbo and air and all the other pieces that go on in bookings? That's the first one. Second one, sort of a big picture question. You have a lot of improvements you've made to the site. Seems like there's a lot more improvements to come. Can you just talk to us about progress you've made around traffic conversion and, you know, where you still see more low-hanging fruit opportunities, however you look at it, whether it's searches, conversions, app opens, et cetera. You know, what are you seeing on the conversion front, and where do you see the biggest opportunity to kind of further fix that going forward? Thanks. Okay. Maybe I'll take the second one first, and then Eric can give a little color on the first. I would say, thanks, Brian. On the low-hanging fruit side, let me just kind of root everybody in where we've been, which is when you're re-architecting the whole platform and, you know, finally consolidating these different tech stacks and everything else, there's a lot of, like, foundational work that goes into that. As a result, there's way less feature work and, you know, test and learning going on every moment of every day because you've got these big heavy lifts to move onto the same stacks. In fact, you know, this quarter, we've made huge progress moving Hotels.com onto the Expedia stack, and we will be consolidating that over the coming months. Those things unlock huge opportunity for us from an efficiency standpoint, from the opportunity to innovate across a wider breadth of travelers, and we get more benefit to every traveler. We've just started to ramp back up our sort of historical A/B testing into conversion. The exciting part is, you know, increasingly, we can do that with machine learning and not just with people designing different products. We've had a lot of wins. Some of the products we're rolling out at EXPLORE, we've mentioned, you know, the smart shopping idea, where we're getting people to buy more premium products. All those things are helping with conversion and helping with, if you will, you know, dollars per transaction and those kinds of issues. We're seeing it in a number of places, but I would say we're still, like, just reigniting that work because we've been so busy on foundational work. I think there's probably a lot of low-hanging fruit to be had. We do have some exciting products rolling out, features rolling out, this week, and we will continue to do that. You know, that's a few things. It's really the day in, day out, A/B testing, machine learning, driving, you know, better conversion. It's really impactful when you get it right, and when you're, you know, when you're not doing it certainly slows you down. I think there's a lot of opportunity, but I can't. You know, I could give you a thousand. It's hard to give you two that are gonna be the difference makers. It's a bunch of little things that make the difference. We're in a much better place if you think about, you know, even just the Hotels.com example I gave you. We would have to test things on Hotels.com, test different things on Expedia, test other things on Vrbo. You know, we will get to a place where we'll be able to test everything across everything, and that's just a much more impactful way to make change and drive better traveler outcomes and better conversion. That's what we're focused on on that front. Yeah. Just to add to that, and then I'll take the first part of the question, just around, one of the things that, I think Peter and I are both excited about is that we're starting to see some of the power of our data come through. The use of machine learning on the site as well. We now have real models live on the site that is starting to drive more personalized experiences for our travelers or customers. What that ultimately means is you can imagine the entire site ultimately as we work through it will be machine learning. The more that we know about customers, the more that we know about travelers, the more they sign up for our loyalty program, interact with our apps and book with us, that ultimately we're able to provide more and more personalized service. What's exciting is that we're seeing those models live and starting to see some good early returns from those. That would be one component that I would add to what Peter mentioned. On the core hotel side, I think I would point out two components. I think we've talked about them a little bit already. One is, ADRs are strong in the core hotel business. We're seeing that in the U.S. and in North America and other places as well. Secondly is just around core hotel volume. You know, we're not going into specifics necessarily between Vrbo and hotel on volume, but we are seeing that vector of hotel improve across nearly or if not all geographies. It had improved in the U.S. It continues to improve over the quarter and in other geographies as well. I think that the hotel business, the core hotel business is much healthier as it's been and are excited to see it continue through the summer. Great. Thank you both. Thank you. Sure. Thank you for your question. Our next question comes from Jed Kelly with Oppenheimer. Please proceed. Hey. Hey, great. Thanks for taking my question. Just going back to some of the gains you made in customer service efficiencies you've talked about on past calls, can you give us an update on the progress there in terms of driving more leverage to the business? Just this week at the EXPLORE Conference, any update on putting more Vrbo inventory on brand Expedia or Hotels.com? Thank you. Yeah. Yeah. Go ahead. Go ahead, Eric. Yeah. One on that. I'll take the first question, and Peter, feel free to add any color, and then, you can take the second one. The thing you'll note in our results this quarter is our cost of sales and, which was, down, pretty significantly relative to 2019, and that's driven by a number of different opportunities. That's lower headcount within that cost of sales, the cost of revenues. Also, that's the use of technology as well. We just continue to add use case after use case in regards to using our communications or our machine learning and that type of opportunities with customers, and that results in a better customer experience. We're getting improved NPS scores while also driving more efficiency in the business as well. Again, good results there. We can start to see those coming through the numbers as well. I do wanna point out on the cost of sales side, there are a couple of other moving parts, and again, just for everyone's edification, cost of revenue or cost of sales consists of merchant fees, customer service, cloud, fulfillment, which are all largely volume-driven. In the quarter, this was the first quarter where we did not have Egencia, and we did have Egencia for a month in Q4. When you're comparing against Q4, just remember that there was some of that Egencia came out. Another thing that we're seeing on the cost side, which is a great improvement, is we've talked a lot about the number of complex calls that we're getting due to the COVID disruption. Particularly on the air side, which are particularly difficult to manage, and we're starting to see those come down throughout the year and the quarter as well. One is we're just cleaning them up, so there are fewer of them. We're getting better technology, and we have some new technology that's being released around more automation where the traveler can manage the process him or herself. All good progress on the cost of sales side. You know, going forward, it of course is influenced by seasonality, and we'll see call center volume increasing in the summer again. At this point, we feel pretty good about the progress we're making. Yeah. I'll just to close on that point before I take the other one. You know, as things normalize and we get out of these COVID times of, as Eric mentioned, all these old flight cancellations, there's a much higher propensity of flight cancellations still than there was pre-COVID, and major disruptions. Like, when we get to normalized times, we should see more benefit even than we've seen so far in our service economics. That's, you know, more to come but should be good news. As far as the Vrbo on Expedia, et cetera, as I mentioned, we are consolidating the front-end platforms right now. We've come a long way on Hotels.com. Vrbo is next to go for us. When those things come together onto one front-end platform, it's going to be a much, much, much better experience for all our customers coming through whatever channel they come through to get to book Vrbo content. This is another place where our B2B business will benefit because we know we have many rewards programs in other places who want our Vrbo content. We will have, you know, yet again, another way to drive demand through our B2B partners with products we haven't always been able to deliver to them because of the complexity. This is a foundational thing we're doing. It's not so much about the tip of the spear, like can we put more properties on Expedia? It's really about merging those stacks and getting them all on one front-end stack. When we do that, which is coming, you know, this year, but still work to be done, that will free up a lot of opportunity for us to, you know, drive that and innovate around how that experience should work in terms of booking Vrbo's through our other brands. Thank you. Thank you. Thank you. Our final question comes from Brian Fitzgerald with Wells Fargo. Please proceed. Thanks, guys. We wanna ask your view on some of the shifts in the regulatory landscape with DMA and the EU and some similar proposals elsewhere. It sounds like these could introduce some friction between Google Search and some of their vertical products like Hotels. Wondering if you could give us a view on how Google Hotels has impacted competition in search auctions, and if you're seeing lower volumes going to Google Hotel Meta, if that could be a tailwind for your customer acquisition costs. Yeah. Not so much. We haven't seen the volumes really decrease. You know, I think directionally what the E.U. is trying to do makes sense, but it hasn't been very impactful, and there's a lot of, you know, debate going on with the commissioners about how to wrangle you know, Google Meta and whether you know the industry has a view on whether it's fair or not, but how the E.U. might go about, and the E.U.'s generally been more aggressive than the U.S. in terms of regulation, but how they might go about trying to get Google to deliver a fairer marketplace. So far, we have not seen any real reduction. Google Hotel Meta continues to be extremely strong, and an important, you know, obviously therefore an important place for all of us to have to deal with. I don't think we're gonna see much change there, not yet. Okay. Awesome. Thanks, Peter. Thank you. With that, I think that was our last question. I just wanna be clear. If I think some of you might be able to make it or might be making it to our EXPLORE conference, if you can't, I invite you, if you can, to make time to watch it streamed or taped. We've been a little cagey 'cause we have a lot of rollouts coming, you know, in terms of product delivery and some exciting things that are coming out, and I think, if you get a chance, you'll get a better understanding of what our B2B ambition is. Suffice it to say that we think, you know, this is an important time for us to pivot in the industry and really explain to the industry how we're gonna be a different player in the market and an enabling player in the market. We believe it's going to allow us to expand the marketplace for our partners and ourselves dramatically. If you get a chance, please tune in. Otherwise, thank you all for your time, and we will talk to you in a quarter. Take care. That concludes today's call. You may now disconnect your lines. Have a nice day.