Expedia Group, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Delivering Value for Travelers: Partnerships like with Southwest Airlines and Premier Inn strengthened value propositions. Vrbo launched new promotional capabilities with nearly 10% of bookings on new rates. Loyalty program active members grew high single digits, with Silver members and above growing fastest. AI used in filters, insurance personalization, and customer service to improve Net Promoter Scores.
• Investing in Growth: B2B growing fast with new supply and APIs. Advertising with new ad formats and automation. International consumer business growth, leveraging GenAI and social traffic. Brand Expedia grew 13% outside the U.S.
• Operating Efficiencies and Margin Expansion: Flat or leveraged direct marketing spend in consumer business. AI enabling productivity across functions, with engineering teams seeing reduced cycle times by over 20% in some teams.

Segment Performance

• B2C: B2C gross bookings were $21.6 billion, increasing 1% year-over-year. B2C revenue was $2.5 billion, growing 2%. B2C EBITDA margins were 29.4%, up nearly 3 points from the prior year, driven by volume growth in higher-margin products like advertising and disciplined cost management.
• B2B: B2B gross bookings were $8.8 billion, up 17%. B2B revenue grew 15%. B2B EBITDA margins were 27.3%, up more than 2 points year-over-year, driven by volume leveraging on cost of sales and overhead.

Guidance

• Q3: Expected gross bookings growth of 5%-7% and revenue growth of 4%-6%. Adjusted EBITDA margin expansion of 50-100 basis points.
• Full Year: Expected gross bookings and revenue growth of 3%-5% (1 point increase from previous guidance). Adjusted EBITDA margin expansion of 1 point (high end of previous guidance of 75-100 basis points). Q4 growth moderated due to lapping last year's strength and U.S. consumer uncertainty.

Risks

• Uncertainty around U.S. consumer spending and travel into the U.S. impacting Q4 growth.
• Competition in the advertising space potentially putting pressure on revenue rates.

Question and Answer

Q: Honing in on strategic priorities and growth investments against traffic dynamics, how do you align key priorities?

A: Ariane and Scott responded on capturing direct traffic, working with AI providers, app traffic growth, and investing in social traffic while balancing returns.

Q: Question on Hotels.com's improvement and outlook?

A: Ariane mentioned brand relaunch in April, new product capabilities, and leaning back into international markets showing positive results.

Q: Question on marketing leverage in B2C?

A: Ariane discussed product improvement, sharper value propositions, and marketing integrations to improve marketing leverage.

Q: Question on B2B growth drivers and FX impact?

A: Scott and Ariane talked about B2B growth in Asia (30% growth), geographic diversity, and FX impact on guidance; Ariane discussed rev share rate trends and product iteration for partners.

Q: Question on AI in B2B and Vrbo mix shift?

A: Ariane talked about AI in B2B early days and Vrbo's progress in filling supply gaps and new product features; Scott discussed FX impact on guidance.

Q: Question on key growth drivers in B2B and rev share rate?

A: Ariane and Scott discussed B2B growth drivers in Asia and geographically diverse partners; Scott talked about FX impact on guidance.

Q: Question on Brand Expedia performance and FX impact on guidance?

A: Ariane discussed Brand Expedia taking share with bundle and save offerings; Scott explained FX impact on guidance ranges.

Q: Question on AI conversion drivers and B2B Asia API?

A: Ariane talked about AI converting qualified traffic and working with AI partners; Scott discussed B2B Asia growth and API value prop.

Q: Question on areas improved and laggards in 1 year as CEO?

A: Ariane discussed progress in platform basics and AI use; Scott talked about cost restructuring and margin expansion potential.

Q: Question on loyalty program and sales/marketing discipline?

A: Ariane elaborated on One Key loyalty program growth and tailoring value propositions; Scott discussed marketing cost discipline and redeployment of spend.