Booking Holdings Inc (BKNG) 2017 Q1 法說會逐字稿

Welcome to The Priceline Group's First Quarter 2017 Conference Call.

The Priceline Group would like to remind everyone that this call may contain forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict.

Therefore, actual results may differ materially from those expressed, implied or forecasted in any such forward-looking statements.

Expressions of future goals or expectations and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements.

For a list of factors that could cause the group's actual results to differ materially from those described in the forward-looking statements, please refer to the safe harbor statements at the end of the group's earnings press release as well as the group's most recent filings with the Securities and Exchange Commission.

Unless required by law, The Priceline Group undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

A copy of the group's earnings press release, together with the accompanying financial and statistical supplement, is available on the For Investors section of The Priceline Group's website, www.pricelinegroup.com.

And now, I'd like to introduce The Priceline Group's speakers for this afternoon, Glenn Fogel and Daniel Finnegan.

Go ahead, gentleman.

Thank you very much, and welcome to The Priceline Group's first quarter conference call.

I'm joined this afternoon by our CFO, Dan Finnegan.

The Priceline Group performed well in the first quarter, reporting year-over-year room night growth of 27%.

Consolidated gross bookings for the first quarter were approximately $20.7 billion, up about 24% year-over-year or about 27% on a constant-currency basis.

Gross profit was up about 16% or about 17% on a constant-currency basis.

Earnings per share were $9.11, and non-GAAP earnings per share were $9.88, up 7% versus the prior year, surpassing the high end of our guidance.

Looking at the group brand by brand.

Booking.com executed another solid quarter with strong top line growth.

Booking.com's total property count now stands at over 1.2 million, which represents a year-over-year increase of 36%.

The Booking.com platform now includes approximately 640,000 instantly bookable vacation rental properties, which is a year-over-year growth rate of 51%.

This very strong growth rate demonstrates Booking's focus on rapidly growing its non-hotel accommodation inventory.

We believe adding these types of properties creates a more robust marketplace and provides real choice for our customers.

Our service is differentiated because all properties are instantly bookable and we do not charge fees to our travelers.

Overall, Booking.com's hotel and non-hotel properties represent a combined total of approximately 25.5 million potentially bookable rooms.

Of this total, 17.5 million are within our traditional hotel partners and 8 million are bookable rooms in our homes, apartments, villas and other non-hotel categories.

In our rental cars product, the group grew rental car days 15% in the quarter, which marks the third consecutive quarter of accelerating growth and the fastest growth rate since the second quarter of 2015.

This growth was driven primarily by Rentalcars.com as they continue to make smart investments in product innovation and customer service.

Improving trends at priceline.com also contributed to the acceleration in rental car days growth for the quarter.

Turning to priceline.com overall.

We're pleased to see the team make progress in Q1 as priceline.com began to see benefits from their investments in technology and people.

These investments have resulted in improvement to product, user interface and experiment velocity and shows that priceline.com is relentlessly focused on delivering the very best deals to its customers.

We believe that these efforts, along with priceline.com's new best deal brand campaign, which highlights its consumer value proposition, will drive further improvements.

Regarding KAYAK.

It delivered attractive profit margins in Q1 and continued to invest in usability improvements, mobile enhancements and new product development.

We expect such investments will enable KAYAK to differentiate itself in the marketplace and grow its audience.

As to the Momondo transaction, we reiterate our previous public statement that we expect to close the transaction later in the year, pending successful completion of the regulatory review.

Now Agoda, which posted another quarter of strong gross bookings growth, with the direct channel growing nicely and increasing share versus the pay channels.

Agoda continues to innovate and invest in its merchant supply platform and experiment with closed user group and other discount offerings to enable it to compete in its core APAC markets, where the use of discounted rates is a more common practice.

Finally, OpenTable produced another solid quarter of healthy diner reservation growth, beating expectations on both the top and bottom line.

OpenTable made further progress upgrading restaurants from its legacy electronic reservation book system to its cloud-based guest-center service, which enables OpenTable to easily introduce system changes and improvements.

OpenTable has maintained a fast pace of innovation, recently launching a chat extension feature in Facebook Messenger.

While it is still very early days for this product, we are pleased that OpenTable continues to be at the forefront of new technologies.

In summary, I am pleased with the group's performance in the first quarter, but we cannot rest.

We are now beginning to prepare for our busy third quarter and are continuously working to improve our services to ensure a successful upcoming high-travel season.

As always, I would like to thank our employees around the world for their hard work and dedication, our supplier partners, and most importantly, our customers.

Finally, I'd like to share some news with you, which is that Dan Finnegan, who most of you know by now, or at least you know his voice since this is his 33rd earnings call, has announced that now, in his 14th year of dedicated service to The Priceline Group, is going to be retiring.

Now he's not going anywhere just yet, but we'll be starting a formal search for the company's new CFO.

Dan will remain as CFO for as long as needed until we find the right person and have completed a smooth transition, but we want to let you all know about the proposed plans.

And I want to take this moment to personally, and on behalf of more than 18,000 employees, to thank Dan for all he has done for The Priceline Group.

Dan, thank you for everything.

I will now turn the call over to you for your 33rd detailed financial review.

Thanks, Glenn.

I'll discuss operating results and cash flows for the quarter and then provide guidance for the second quarter of 2017.

All growth rates referenced in my comments are relative to the prior year comparable period, unless otherwise indicated.

I highlight that as we have discussed for several quarters now, the non-GAAP figures for our Q1 results and Q2 forecast includes stock-based compensation and do not reflect the reduction to income tax expense related to available NOLs.

The reconciliation between our GAAP and non-GAAP results is detailed in our earnings release.

2017 is off to a strong start.

The room nights booked in Q1 grew by 27% despite a challenging prior year growth comp.

We estimate that the shift of Easter into Q2 had a slightly beneficial impact on Q1 gross bookings growth with an offsetting negative impact to Q2 gross bookings growth, which I will discuss further in a moment.

The Q1 impact is offset by Q1 prior year's extra day for leap year.

Performance was strong across each of our key geographic regions, and we believe we grew our market share in the U.S. and internationally through outstanding organic execution by our brands.

Rental car days growth also accelerated to 15% in Q1 compared to 14% in Q4.

Average daily rates for accommodations or ADRs were up about 1% for Q1 versus prior year on a constant-currency basis for the consolidated group, which was consistent with our forecast.

Foreign exchange rates unfavorably impacted growth rates expressed in U.S. dollars for our Q1 results as compared to the prior year.

Q1 gross bookings grew by 24% expressed in U.S. dollars and grew by about 27% on a constant-currency basis compared to prior year.

Gross profit for the quarter for The Priceline Group was $2.3 billion and grew by 16% in U.S. dollars and by about 17% on a constant-currency basis compared to the prior year.

Gross profit as a percentage of gross bookings for Q1 is 84 bps lower than prior year Q1.

The decrease is due largely to book-versus-stay time lag, impacted by Easter shifting to Q2 this year and an expanding booking window.

Other contributing factors to the variance are discounted closed user group rates and business mix.

The shift of Easter from Q1 last year to Q2 this year also negatively impacts Q1 gross profit, operating profit, EBITDA, net income and profit margins and will benefit those metrics in Q2, in both cases, compared to the prior year.

Our international operations generated a gross profit of $2 billion, which grew by 17% in U.S. dollars and by about 19% on a constant-currency basis compared to the prior year.

Gross profit for our U.S. operations amounted to $315 million, which grew about 6% compared to the prior year.

Advertising and other revenue, which is mainly comprised of non-intercompany revenues for KAYAK and OpenTable, grew by 8% in Q1 compared to the prior year.

Margin performance was better than our forecast due to gross profit growth and advertising efficiency that exceeded our forecast.

The timing of investments in non-ad OpEx was also favorable to forecast.

GAAP operating income grew by 1%, and GAAP operating margins decreased by 341 bps compared to Q1 last year, due mainly to performance advertising.

Performance advertising deleverage was impacted mainly by the timing of bookings versus stays that I just discussed and strong growth in performance advertising channels.

Adjusted EBITDA for Q1 amounted to $635 million, which exceeded the top end of our guidance range of $580 million and grew by 4% versus prior year.

GAAP net income and fully diluted EPS both increased by 22%.

Non-GAAP net income per share was $9.88, up 7% versus the prior year, exceeding our guidance for the quarter and FactSet consensus of $8.82.

Our non-GAAP tax rate of about 16% was favorable to our forecasted rate of 19%, mainly due to nonrecurring discrete tax adjustments in the quarter.

In terms of cash flow, we generated $381 million of cash from operations during first quarter 2017, which is an increase of about 10%.

We made a prepayment of income taxes in the Netherlands in Q1 to earn a prepayment discount, which negatively impacts operating cash flow for Q1, but will benefit subsequent quarters when the taxes would have otherwise been due.

During the quarter, we returned $212 million to our shareholders through share buybacks.

In March, we raised EUR 1 billion of cash for our U.S. parent company by offering a 5-year bond in Europe at a 0.8% interest rate.

Our cash and investments amounted to $15.5 billion at March 31, 2017, with about $2.3 billion of that balance in the U.S.

Now for Q2 guidance.

We are forecasting booked room nights to grow by 16% to 21% and total gross bookings to grow by 12% to 17% in U.S. dollars and by 15% to 20% on a constant-currency basis.

Our Q2 forecast assumes that constant-currency accommodation ADRs for the consolidated group will be up by about 1% compared to the prior year period.

As mentioned a moment ago, seasonal factors added to growth in Q1 and are forecasted to pressure growth in Q2.

We're comfortable with the combined forecasted growth rate for the first half of the year, which we believe is reflective of generally healthy macro travel trends and implies a continuation of market share gains evident in our reported Q1 results.

We forecast gross profit to grow by 14% to 19% in U.S. dollars and by 17% to 22% on a constant-currency basis.

GAAP operating margins, expressed as operating income as a percentage of gross profit, are expected to be lower than prior year Q2 by about 140 bps.

Our Q2 forecast assumes year-over-year pressure on performance marketing ROIs and that pay channel growth will continue to be strong.

Our forecast also reflects brand advertising and non-advertising expenses as we invest towards high-travel season and innovation to drive future growth.

Q2 adjusted EBITDA is expected to range between $860 million and $905 million, which at the midpoint is up 9% versus prior year.

EBITDA growth and margins are impacted by the factors I just discussed for GAAP operating profit.

We forecast GAAP EPS between $12.55 to $13.25 per share for Q2, which at the midpoint is up by about 11% versus prior year.

Our EPS guidance includes interest expense on our recent bond issuance and assumes a fully diluted share count of 50.1 million shares, which reflects the beneficial impact of the common stock repurchases we have made to date, offset by additional equivalent shares related to our convertible bonds due to the increase in our stock price.

We're forecasting Q2 non-GAAP fully diluted EPS of approximately $13.30 to $14 per share, which at the midpoint is up by about 8% versus prior year.

Our forecasted non-GAAP income tax rate is about 18% for Q2 and the full year.

Our Q2 forecast is based upon recent foreign exchange rates and assumes that our growth rates in U.S. dollars will be negatively impacted by foreign exchange rate fluctuations.

Consistent with past practice, we have hedge contracts in place to substantially shield our second quarter EBITDA and net earnings from any further fluctuation in the euro, British pound and various other currencies versus the dollar between now and the end of the quarter.

Our forecast does not assume any significant change of macroeconomic conditions in general or in the travel market in particular.

As Glenn just mentioned, I've decided that now in my 14th year with the company, the time is right to start working towards my retirement.

Equally importantly, I think the time is also right for the company.

We are in great hands with Glenn and our brand CEOs running the business.

Our brand CFOs and my headquarters finance team are world class, and we'll keep doing great work as we transition to a new Priceline Group CFO.

I will stay with the company as long as necessary to help recruit my successor and to ensure a smooth transition.

I thank all my colleagues around the world for their incredible accomplishments over these many years.

It has been a dream come true to be part of such a wonderful team.

And we will now take your questions.

(Operator Instructions) Our first question comes from Douglas Anmuth with JP Morgan.

This is Dae Lee on for Doug Anmuth.

First question on gaining share in the U.S. How much of that do you think is taking share from competitors versus adding new properties like vacation rentals?

And my second question on share buyback, could you please update us on how you're strategically thinking about buybacks and what could cause that to change?

David for Doug, I believe?

It's Dae Lee in for Doug.

Let me take -- I'm going to do the second one about share buyback question, and I'll let Dan talk about the first one.

We believe we'll be consistent going forward the same way we've been in the past regarding share buyback.

We are opportunistic.

We recognize shareholders want us to use our cash effectively, efficiently and appropriately.

So as opportunities are there, we will be buying share back, but we do it in a measured way.

I think the best way to look forward is to see how we've done over the last few years and consider that as guidance for going forward.

And as far as share in the U.S., Dae Lee, we look at the market -- we tend to size the market based upon the properties that we have on our extranet.

So there's over 1.2 million properties on Booking.com today.

We know the number of rooms that are in those properties, and so we look at that as a proxy for the market.

That includes vacation rentals, so -- and our room nights booked also include vacation rentals.

So we see them as basically interchangeable with hotels and other types of properties as places where people want to stay when they travel, and we want to give them the maximum number of choices.

So looking at it that way, we can see our growth, in total, we still have a relatively low share of the worldwide market, single digits.

And we can also see our growth for the U.S. market relative to the market's growth, relative to what other players have reported, including our biggest other online travel competitor, and we feel that we're gaining share based upon those metrics.

Our next question comes from Brian Nowak with Morgan Stanley.

I have a 2-part single question.

It's on the U.S. Booking.com and on the vacation rentals.

You've had really good progress there the last year or so.

Arguably, even more than that.

I guess, I'd be curious, if you could just talk about the 1 or 2 areas you really look to improve in the U.S. Booking.com and vacation rentals to kind of further drive growth, what would those 1 or 2 areas be?

Well, Brian, as I think the way you asked that question, vacation rentals -- and I'm going to talk about it in general and not narrow to any specific geography.

We believe it is a very important growth area for us.

We've been involved with this for some time.

We continue to grow it, as I mentioned, about 41% increase in the instantly bookable vacation rental properties.

We are very pleased with the way we do the business, and that is we don't charge those travelers fees.

And I just said, these are all instantly bookable.

We think that's an advantage.

One of the things we need to continue to do is add even more properties.

When you look at some of our competitors, they have more properties.

And breadth is an important thing to make sure that we have the availability, the right properties at the right price for our customers.

So we're going to continue to do that.

We also need to make sure that all people are aware that this is a great product.

I think that it's not unknown that we do not have the same awareness or there's not the same awareness of our vacation rental property, particularly in the U.S., as some other competitors have.

So we need to make sure that everyone knows that we've got a great product there, too.

And your other question was?

It's on the U.S. Booking.com kind of -- same kind of question, where you've done really well, but if you could kind of point to 1 or 2 areas where you say, here's some low-hanging fruit we can still improve, what would those be?

Well, I think that we continue to do the same formula that we've done throughout the history of our company and has helped us get to the level of success that we are.

There's not 1 or 2. There is: make sure we have breadth of property; make sure we have best price; make sure we have the way a customer goes through our path is the easiest, best way for somebody to do it; be sure that we are offering them in the way they want it.

If they want to reserve a property and not have to pay until they show up at the property, we offer that.

If they want to pay upfront, we need to be able to offer that.

And we have different brands that offer different ways to do it.

In fact, most of them offer both ways, though not for all properties.

I think, in the end, it's just continuing to crank out the same formula we've had in the past, maintain good relationships with the suppliers to make sure we're offering them a great relationship, and we will continue to grow as we have grown in the past.

Our next question comes from Justin Post with Bank of America Merrill Lynch.

Sorry to see you leaving, Dan.

I hope you stay for a while.

A few questions on guidance.

I guess, first of all, just help us put the 8% earnings growth in context.

It seems like a pretty healthy macro and an easier comp.

And then I think on the prepared remarks you said, expect some ROI pressure.

I believe, on the last call, you indicated that kind of ROI pressure was lessening.

Has there been a real change there that's going on?

And then maybe, did you put your usual amount of conservatism in 2Q guidance, given the late -- how it's back-end loaded?

Okay.

Thanks, Justin.

Well, first of all, for the guidance, no change in approach.

Same approach we'll be -- we've used every quarter.

It's a little bit different in that there's volatility in the early part of the quarter here because of the shift of Easter, and so that makes things a little bit more difficult.

I'd say that the market remains healthy.

We see occupancy and ADRs are strong.

The seasonal impact has certainly negatively impacted growth for Q2.

We think the booking window expansion that we've been talking about for a couple of years now is probably, all else being equal, moving some bookings that would have been made in the past in Q2 into Q1 and even to Q4 because people are booking early.

If you look at the midpoint of our room night guide for Q2 together with our actual results for Q1, it would imply a 23% growth rate, which would compare -- it takes the seasonality out of it and the shift of hotel or booking window -- shift of Easter timing or booking window.

So that 23% growth would compare to a 27% growth for the first half of last year, which -- we're comfortable with that.

We think that's very solid performance.

We expect the business to decelerate structurally, given the size of it and the long-term trends that we've seen over many years.

The growth may decelerate more in certain quarters.

We have accelerated in certain quarters.

But overall, for the long term, our growth has been very resilient.

It's been a pleasant surprise.

The growth drivers that drive -- that have driven our growth in the past are still there, so the secular shift from offline to online continues.

We still have a single-digit share of a bit -- very big market.

So there's a lot of opportunity to continue to add properties and to continue to penetrate the properties we have more deeply.

Our teams are adding properties at a very healthy rate, as Glenn talked about.

They're working every day to continuously improve conversion on our websites.

And then we've maintained a very consistent approach to advertising.

No change in our approach.

No change in competitive position that we can detect.

So we continue to invest in reasonable ROIs to drive a healthy mix of top line growth and profitability.

The 8% growth in guidance for EBITDA is a function of that top line growth that we talked about and then just the margin pressure that we're guiding to in the quarter, which is less than what we've seen over many of the last quarters where we've guided, and the drivers are pretty much every line item.

So we are assuming that there will be more ROI pressure in Q2.

But what I said last quarter, that overall, we think for the first half of this year, the margin pressure from performance marketing will be less than what we experienced in the back half of last year, I'd stay with that statement.

I still feel comfortable with that.

And then we're also investing in brand advertising as we're in peak booking season, getting ready for peak travel season.

And we're investing in OpEx for our brands, customer service people, property people to continue to sign new properties and continue our growth in the future, and then IT people that are working on innovative projects and just keeping up with the growth of the business.

Our next question comes from Mark Mahaney with RBC.

Okay.

First, congratulations, Dan.

It's a phenomenal 33-quarter stretch, both fundamentally and, obviously, in terms of the stock, so congratulations on that.

Two-point -- 2 questions, please.

First, you talked about an expanding bookings window.

Is that -- as you mix shift more and more away from hotels to non-hotels and vacation rentals, alternative accommodations, is that just a natural outflow of that, that will bring you expanded bookings?

And then I think you may have just covered this a little bit in Justin's question, but I'll try it again.

The advertising efficiency that exceeded your forecast in the March quarter, was there something -- anything new in particular to call out there, anything that suggests that you'll sustainably improve advertising efficiencies?

Or do you think that there was kind of onetime-ish kind of items?

Okay.

Thanks, Mark.

Regarding the expanding booking window, I would attribute that more to people continuing to repeat with our business, becoming familiar with the model, with strong occupancy rates and rising ADRs, looking to book farther in advance and feeling comfortable doing that because they know we have a very flexible model.

And if their plans change later, they're able to change their booking.

So I think that's the more fundamental driver there.

That, I would expect to continue.

If there were some significant change in macro or maybe people felt less comfortable about whether or not they were going to travel, economically, or the ADRs were dropping, maybe they would change their behavior, but it would still be a free option to make a booking.

And then if prices drop, you can change your booking later.

So I think that's what's driving that.

And then ad efficiency was pretty solid in Q1.

It's a mix of what's going on in all of our brands.

So you have some brands like KAYAK and Agoda leaning a little bit more heavily into brand advertising or discounting to drive demand to their websites.

There's still underlying ROI pressure, in general, and it's the trend we've seen for many years now.

I would expect to see that going forward, too, Mark, until we don't see it for an extended period of time.

I would just build that into the forecast.

It's what we have built into our forecast for Q2, and so that's what's built in there.

I wouldn't -- there's nothing that I've seen that would lead me to believe that there's a sustainable ability for ROIs to improve year-over-year.

Our next question comes from Heath Terry with Goldman Sachs.

You actually kind of touched on this a little bit in response to Mark's question.

But just kind of curious how we should be thinking about the trade-off between growth and margins going forward, understand that the performance advertising line's going to be the biggest variable there.

But you guys are clearly outgrowing the industry, but we've also seen about 300 basis points of compression so far this year, and it seems to be about that implied in your Q2 guidance.

Is that the kind -- right kind of run rate in terms of what's necessary to grow bookings and revenues or gross profit at this level given where the macro environment is?

Or is there a better way to think of that?

I see a little less margin pressure than what you're talking about for Q2, Heath, unless you're adjusting for Easter timing, but then, there would be less pressure in Q1.

So yes, I'm seeing more like 150 bps for GAAP operating margins.

It's always a balance between top line growth and bottom line growth.

We try to strike a balance.

From time to time, we see opportunities to invest in brand advertising.

We think that's a good thing to do for our business for the long term.

There are OpEx investments that we've come across in the past, things like investing in mobile, which have been critical to the success of the business.

If you go back to 2012, we were a business that was generating room night reservations of 200 million, and over the last 12 months, we're more like 600 million room nights.

So I think those investments have paid off, and we're going to try to make smart investments for the future.

We're always looking to manage those expenses as closely as we can.

And with a fast-growing business, we generally expect that we can make the investments that we need to make and not have pressure on margins from non-ad OpEx.

But from time to time, where we see the opportunity, we won't let short-term margin objectives do something that might be detrimental to the long-term growth of the business.

Okay, great.

I appreciate that.

And then I guess, just on the alternative accommodations business.

How much of an advantage, at least when it comes to gaining share and traction in that space, do you feel like your fee-free model for consumers is for you relative to most of the other competitors in the space who are charging consumer-facing fees at this point?

It's Glenn speaking.

Well, that's a difficult question to answer in terms of how we're doing versus the competitors, given some are private and don't reveal how fast they're growing.

I can only attest to our growth rate.

And while we don't give out specific different types of growth rates for our different types of properties, I'm comfortable saying that in the area you're talking about, that is growing faster than the overall average for the entire company, so we are pleased with that stronger growth rate in that area.

We believe, and we -- our DNA is experiment and test.

If we thought another way was better, we would do it that way.

We're pleased with the way we're doing it, and we think in the long run this will be the winner.

And one piece of evidence that I'd point to is I noticed that some of our competitors who have been shifting to our method of instantly bookable, and talking about how fast they're going to be able to get those to be instantly bookable.

So I think that would kind of indicate that other people believe that this is the better route.

Our next question is from Eric Sheridan with UBS.

Congrats, Dan, on the decision.

Maybe focusing back on driving engagement with your return customers.

I want to understand a little bit about where you're allocating capital, either in remarketing to bookers or maybe even the Genius program and how you're thinking about the returns driving second and third direct traffic back to the site might change some of the marketing efficiency long term.

So we don't disclose repeat rates nor do we disclose how much money we're devoting to remarketing.

So a lot of the data you would like to hear, unfortunately, I can't share that with you.

I can share with you, though, how important we believe repeat business is.

And the way you get repeat business isn't just marketing-type stuff.

What you have to do is provide a great bookings experience for the customer.

That's something that we think we have done no matter which way they're doing it.

Whether they're doing it online or mobile, we believe that we provide a great service to our customers, and that's why they come back.

And a couple of other reasons, and one that I think is so important is customer service.

We spend a lot of money on customer service.

And right now, in this quarter, we're hiring customer service people to be prepared for that very, very important third quarter high season.

We have to do that right and we need the people to do that.

We need to train them now so they will perform well in that high-season period because good customer service is where you get loyalty.

And it doesn't have to be anything that's screwed up in the booking of it.

If the customer has a problem, we want to be able to help them out no matter what the situation is.

That's how we build loyalty, and I think that's one of the reasons for our strong growth.

And I can give lots of anecdotes, but I won't.

But I know we've reached out and we've helped our customers a great deal.

And I think that's one of the great reasons that we're being successful.

Does that help?

Our next question comes from Mark May with Citi.

I know that vacation rentals have been a meaningful contributor to room night growth recently, but yes, I think you recently stated that you're not only in the early process of adding inventory there, but that you haven't maybe promoted it like -- as much as you would like to your users.

And I guess, just the question is, what are your plans for enhancing the promotion of this offering to your users?

And then secondly, another question in terms of advertising performance, advertising leverage.

Is there anything that you're seeing, either in the market externally or things that you're doing internally driven, where you actually think that you could actually see some leverage in ad spend in the near to medium term?

So I'll take the first one and Dan will take the second one.

I agree with that statement that not as many people know about our great product as I would like because I'd like everybody to know about it.

Now in terms of your question about how we're going to make more people be aware of our vacation rental business, we are acting.

We are working on it, and we are coming up with plans.

But I think the last thing I want to do is reveal what our plans are to our competitors and how we're going to make more people aware that we do have this great product, so I'm going to have to pass on actually giving away the plans on how we're going to make people aware of our product.

Dan?

And then performance advertising leverage, Mark, it's all the factors you mentioned, so it's what's happening with external players, what we're doing internally, what -- again, trying to strike a balance between top line growth and bottom line growth.

So we're pushing into channels where we think we can do that efficiently.

There's also the matter in which the auction is run by the advertiser, and we're balancing all those to try and strike a good balance.

What I answered earlier to somebody else's question, I wouldn't forecast that there's going to be leverage in performance marketing.

I would have to see that for a number of quarters and have some reason to expect it to continue before I would build that into a forecast.

While we have had quarters here and there where the leverage story on performance marketing has been better, in general now, for many years, all the way back to 2012, it's been a source of margin pressure.

And I've seen it as a source of margin pressure in other players in our space, too.

In fact, to a greater degree, on their margins than what we've experienced with ours.

So I feel comfortable that we are continuing to expand our lead in a very competitive marketplace, and performance marketing has been the most important tool that we've used to try and drive traffic to our website over our history and build our brands.

We're improving our capabilities with brand advertising, and we look to deploy money there, too, where we think we can get a reasonable return, even if it's over a longer period of time because there's typically a lag there between when you spend and then the benefit that you get by having more brand awareness and having people potentially come to you directly, which could improve the performance advertising metrics.

And maybe even just causing them to search for our brand or a higher propensity to click on our brand when they search in other paid channels.

So I think there's opportunities for us from time to time to invest a little bit more heavily in brand advertising and that could help, but I wouldn't forecast performance advertising leverage until we see that happening.

Our next question comes from Paul Bieber with Crédit Suisse.

Congratulations, Dan.

I was hoping you could provide some color on the puts and takes that drove the lower year-over-year agency take rates.

I think some of that is from the Easter shift, but hoping that you could elaborate.

And then the second question is, I was hoping that you could provide color on why metasearch is becoming so strategically important across the industry.

Is it because of trivago's growth?

Is it because of the breakdown in rate parity?

Or is there some other reasons for just the strategic importance of metasearch?

Why don't I take that second one first and then Dan can take the first one?

So meta is important.

We have KAYAK.

We're pleased with their performance.

And there are others, like you mentioned, trivago.

But I'd caution you on saying how important it is.

I'm not sure.

It's a qualitative term not a quantitative term, and I'd like to point out that our overall business through meta is still a relatively small amount, so I wouldn't overemphasize it.

It's important, but I wouldn't overemphasize it.

Why is it growing?

Why do people like to use it?

I could give some potential reasons of people enjoy to be able to see multiple price properties there with different prices that they can see, "Is this the best price or not?" And then they can go off to a place like Booking.com or Priceline or Agoda and do the actual booking.

But the why side is important to us as to making sure that we're there.

We try and run our business, so we are where the customer wants to be.

The customers who want to use meta, we have a great product there for them.

And that's how we do it.

It's us not trying to tell the customer, "You should use this." It's us making sure we have the best product service available for that customer who wants to use it.

And I think that's the best way to look at it.

Dan?

And Paul, your assumption was correct on the agency take rates.

So you're looking at agency gross profit divided by agency gross bookings.

That's down because of the Easter shift.

The fundamental take rates are very stable.

Our next question comes from Ross Sandler with Barclays.

Congrats, Dan.

I just had 2 questions.

One was a follow-up on the earlier question about repeat users.

So as some of those efforts that Glenn mentioned to drive repeats, are those metrics actually improving?

Or do you guys kind of view this as a space where the potential around repeat, given the low frequency of purchases, just may not be there?

Or is there a penetration rate that you think the industry needs to be at where repeat -- organic repeat can be a source of leverage at some point down the road?

And then the second question is any color on Facebook's new retargeting product for travel?

I know you guys have been testing it.

How's that been going?

It's Glenn speaking.

So going back on that repeat thing.

I think the way we answered it pretty much answers it as much as we can say, though I will add, we are very pleased with our repeat rate.

And I'm not going to give out a repeat number, but I'd caution anybody in trying to think they know what it is.

So I just want to caution you on that.

The second thing, which I didn't mention about repeat, which I think is an important factor, is providing that great service and make -- and having them come back is something that not only helps us in the business with that person, but there's that ability for people to be talking about what a good service it is.

So you get another benefit in that word-of-mouth-type advertising that's also very helpful and very powerful.

So we agree repeat's very important.

We work to make sure we give a good service.

We want them to have that good service, and then there's an echo effect on it going forward.

In regards to Facebook, we've mentioned earlier several times that we are working with Facebook, trying to improve the way to get more business out of Facebook.

We have people who are dedicated to working with Facebook to create this because, as we've pointed out, we would like to spend a lot more money with Facebook.

But as Dan has pointed and we've talked about a lot in the past, we try to be very disciplined about our marketing expense and we want to get the appropriate ROI.

So we need to come up with tools and ways to get -- and products and -- ways that Facebook will give us a good return on our spend.

When that happens, we are ready, willing, able to spend a lot of money with them to find another way to get customers.

Is that helpful?

Real helpful.

Our next question comes from Perry Gold with MoffettNathanson.

Congratulations, Dan.

Two, please, if I may.

Can you provide any color in terms of any potential impact you saw to inbound travel to the U.S. as a result of the current administration's rhetoric and attempted travel bans?

And could you also provide any color on broader macro or regional trends you've seen through the first 5 weeks or so of 2Q?

Any notable changes to call out?

I'll just take the first part and Dan can talk about the second part.

Regarding political events, a couple things that I'd like to emphasize.

One, we are an extremely global company.

We are able to get someone a property in more than 200 countries and territories around the world.

And if somebody decides that they don't want to visit one place, for whatever reason it is, we are fortunate that we have properties where, hopefully, they will want to go, and they'll be able to use us for that.

So that's the first point.

The second point is we've heard a lot of rhetoric about this so we look at our data.

And we have not seen a material impact from political events in the U.S. that we can tease out as saying that's a cause of something happening.

It's -- just we don't see it there in a material way.

Other people may be seeing different things, but we can't comment on theirs.

We're just looking at our data.

And Dan, you...

And Perry, we feel like the broader and macro trends are positive, and particularly in the travel market.

We see occupancy rates are strong.

ADRs are up.

The reported results of other players in the space, I think, were very strong.

So it feels to us that the macro is healthy.

As far as it relates to the trend thus far in the quarter, it's a little bit clouded by the shift in Easter.

So when a -- there's a holiday like that, where people are traveling, what we'll typically see is an uptick in cancellations going into the holiday for people whose plans have changed.

And then while people are traveling, they're not making bookings, and so that impacts our gross bookings growth.

So I'd say the broad macro is positive.

It's a little bit difficult to read because of the impact of the shift and timing for Easter into Q2.

Our next question comes from Lloyd Walmsley with Deutsche Bank.

Wondering if you can just talk a little bit about the seasonality of the kind of non-core hotel accommodation business versus the core hotel.

Do you see kind of more alternative accommodations have a longer booking window that's concentrated in the beginning of the year such that, that faster growth kind of influences growth rates in 1Q structurally relative to the rest of the year while it's growing faster?

Is there any color you can give that help us understand that seasonality?

Lloyd, we're not seeing any significant impact on the booking window from the growth in vacation rentals on our site.

And maybe that's based upon the way we're presenting them, very integrated into our search results, and so people are still searching the way they would search.

Maybe there are some on the margin, people that are coming in specifically, looking for vacation rentals and they're booking a little bit earlier.

But we think that the expansion of the booking window is more driven by growth in repeat users and direct traffic than the addition of vacation rental properties.

And I guess as a follow-up, it sounds like most of the users coming in and booking alternative accommodations are probably coming in on similar marketing channels and similar search terms.

But is there any difference in terms of like where you're finding people who end up booking nontraditional or the kind of marketing ROIs associated with those folks or those channels?

We're using the same channels to find people that end up booking vacation rentals.

It opens up the panoply of keywords that we can advertise on by having these different types of properties, but the channels are the same.

And we've said from time to time in the past that the vacation rental ADRs, take rates and ROIs are fairly similar.

I mean, we don't run a separate ad word campaign just for the vacation rentals.

They're part of our broader campaigns, and so we look at it in total.

Our next question comes from Peter Stabler with Wells Fargo.

This is Rob on the call for Peter.

Another question on vacation rentals around the instant bookability.

Looking at your competitors today, properties that are online bookable with a 24-hour confirmation outnumber instantly bookable properties there maybe by 5 to 1 or more, depending on the market.

Just wondering how important changing that owner or manager behavior will be for your supply growth into the future and what you think might change that behavior over time?

Also, just wondering, it's been a while since you gave us a sense of the relative scale of VR room nights.

So I think the last time was maybe back in mid-2015.

Wondering if you might be willing to give us an update there.

So we're not disclosing the room night data, so we'll not be passing that over.

But in regards to growing the supplier base, 51% supplier base growth in that category is a very rapid growth.

So I don't think we're up to a stage where we have to be concerned about changing property manager behavior right now.

If and when that happens, we'll deal with it at that point.

But right now, just by this most recent data that we've disclosed, over 50% growth rate says that we've got a lot of properties out there to put on with the thing -- the way want to do it right now and not have to convince anybody of anything.

We just need to get them signed up and put on the service.

Our next question comes from Brian Fitzgerald with Jefferies.

Thank you, Dan, and congratulations also.

Maybe a quick question on TripAdvisor.

Have you seen any impact to your performance there since Expedia's been added there?

And then any -- I think you said it's too small really to move too many needles, but any impact to the business from your Instant Book leads on TripAdvisor?

Brian, no, what we said was when we got added to Instant Book, there was a lot of questions back then what was the impact, and because of the relative size of TripAdvisor to our business, it wasn't a significant impact to our growth or our advertising efficiency.

And so the same is true now as Expedia got added.

It hasn't significantly impacted our growth trend or ADRs with TripAdvisor.

Our next question comes from Naved Khan with Cantor Fitzgerald.

Can you elaborate a bit on the impact of the strong euro on the U.S. inbound and outbound and how meaningful it is as a part of the overall business?

And then just on an expense line item, I look at G&A, it jumped a bit sequentially as well as year-on-year.

Anything to call out there?

Well, strong euro.

Times have changed when now the $1.09 euro is a strong euro.

We're used to the good old days of $1.30.

So I'd say nothing to call out there, Naved.

It's been relatively stable for the last year or so.

It's kind of been in that like $1.05 to $1.10 range.

So nothing that I would call out regarding change in travel behavior from the euro.

And I'm sorry, what was your second question?

Just the G&A expense kind of jumped sequentially, also year-on-year, so anything to call out?

Anything onetime there?

Sequential G&A.

I mean, the key drivers in there would be office-related expenses, so rent and related occupancy expenses and personnel-related expenses, travel and so forth.

Yes.

It's just that it's probably the first time in maybe over a year or so that the line item sort of deleveraged or was showing leverage.

That's why -- that's the reason for the question.

It would just be investments that we're making in those areas as we're adding headcount and being ready for growth in the future.

And I would expect that, that would be an area, in particular, Naved, where we would have leverage for the most part going forward.

So for whatever reason, I think, in Q1, it could purely just be from the Easter shift.

Our next question comes from Kevin Kopelman with Cowen and Company.

Congrats, Dan, on the retirement and on a great tenure.

You talked about seasonality of bookings this year with Q2 slower than usual.

Can you also comment on the seasonality of profit?

Do you anticipate that the typical weighting of profit toward third quarter high season will be increasing this year versus last year?

And if so, why?

Well, we don't have a Q3 forecast for you, Kevin.

So I won't say whether the weighting will increase because that could give you a read on the bottom line, but it will continue to be, by far, our biggest profitability quarter of the year, given just the normal seasonality of the business with the great preponderance of travel happening in Q3 for high-season summer travel.

Okay.

And then just on the competitive landscape.

Last year, a key competitor was having some issues during this time of year.

Are you seeing any change as they've been more ramped up this year?

A couple of things about the way we look at the landscape.

One is we try and concentrate mostly on what we can do better.

And we don't -- and we're not as concerned about what our competitor's doing.

That's been a part of a culture at The Priceline Group for a very, very long time.

With that being said, we are not naïve.

We do recognize that there is substantial competition out there and people would like to try and take away some of our business and not let us go as fast as we've been going.

I haven't seen any major changes in the last quarter that would indicate any major changes in the competitive landscape.

And I'll let Dan -- if Dan has any thoughts.

Am I missing anything?

I guess I'll just add, from last year, we couldn't notice anything discernible in our results when they were talking about issues with their website, so nothing that we could detect.

Our next question is Jed Kelly with Oppenheimer.

Can you assess or expound on any changes you are seeing over the past year with the comfort level that traditional vacation rental property managers that were typically operating through an inquiry-to-book model are now having with the instantly online bookable model?

I haven't spoken to enough property managers to be able to answer that accurately or not.

I think we have to just look at the data, and the data is that we have lots of property managers who are willing to put their properties on our system.

And as you can see from some of our competitors and what they've said, you can see that's happening in their businesses, too.

So from that data, I would make the assumption that people are becoming comfortable or are comfortable or always were comfortable if there was a system to do it easily.

That's the best, I think, I can answer on that.

And I just would reiterate that we are pleased with the growth of our supply in that area.

It is something that we are very focused on.

Our next question comes from Michael Olson with Piper Jaffray.

And Dan, congrats on a great run.

I just had one question for you guys.

There's been some chatter that the hotel groups are looking at finding new ways to gain back more direct booking share potentially through some, I guess, alternative methods like more lobbying or legislative or other means.

I'd just be curious if you have any thoughts on whether or not this is a risk for Priceline and perhaps, generally, just how you feel about where your current relationships are with your hotel partners.

Sure.

Couple of things, and I'll start by saying we have good relationships with our hotel suppliers.

And if we didn't have good relationships, we wouldn't be able to grow as fast as we've been growing or achieve the success that we've been able to achieve.

And we do that by providing to our hotel partners some great services, helping them in areas that they can't do.

We bring them customers, millions of customers.

We put a platform out that enables them to see people from around the world and be able to try and get that customer to come into their hotel.

Now I've read in the news some things that you're referring to, and I'd just make a couple of points.

One, as I think we've talked about before, and you can do by just doing some math on the numbers that we've revealed, we have a mid-single-digit percentage market share in this business.

There are a couple implications of that.

One is, we've got a lot of landscape -- there's a lot of room up for us going forward.

Second thing I'd say is, in the news item, I heard them use a word like monopoly.

And I'd just point out that I have never heard the word monopoly used in the same sentence about somebody who has a single -- mid-single-digit share.

We've done a very good job with our partners since I've come here 17 years ago, and we will, I believe, continue to do so going forward.

Every company wants to try and have customers come to them direct and lower the marketing and distribution costs as much as possible.

We get that and we'd like to do so ourselves.

Believe me, I'd love for our customers to just call us and not have to pay any marketing at all to get them to come.

But that's not the way the competitive world works, and you have to pay to get people to come and notice you and pay you for them to come -- continue to stay and come back.

That's the way it works.

I don't fault anybody for wanting to try and bring people to their business directly.

I do fault anybody who makes the statements or allegations that aren't true.

Enough said.

This concludes the Q&A session.

I'd like to turn the call back over to management for closing remarks.

Well, I just want to thank everybody for listening to us, and thank you very much.

Ladies and gentlemen, this concludes today's conference.

Thanks for your participation, and have a wonderful day.