Booking Holdings Inc. Q4 FY2024 earnings call

• Innovation: Booking Holdings has a history of evolving with new technologies, from early internet days to now leveraging generative AI. Believes AI-powered offerings like travel vertical specific agents will enhance connected trip experiences. • Connected trip vision: Making progress in simplifying travel planning, booking, and experience. Connected trip transaction growth accelerated to over 45% YOY in Q4 2024, representing high single-digit percentage of Booking.com's total transactions. Merchant offering at Booking.com expanded, with merchant gross bookings mix increasing. Alternative accommodations continued to grow, providing more choices for travelers. Genius loyalty program extended into other travel verticals, promoting loyalty and direct booking behavior. • Transformation program: Announced organizational changes in November 2024, including modernizing processes/systems, workforce reduction, optimizing procurement, and seeking real estate savings. Believes these steps will improve organizational agility and operating efficiencies.

Fourth quarter room nights grew 13% YOY, exceeding high end of prior expectations. All major regions had double-digit growth. Fourth quarter gross bookings grew 17%, revenue 14%, both above high end of prior guidance ranges. Adjusted EBITDA was $1.8 billion, 26% higher YOY and 12% above high end of guidance. Full year 2024 gross bookings $166 billion (+10% YOY), revenue $24 billion (+11% YOY), adjusted EBITDA over $8 billion (+17% YOY). Room nights growth for full year 2024 was 9% YOY. Alternative accommodations at Booking.com had 19% room night growth in Q4 2024, with 7.9 million listings at end of Q4, up ~8% YOY. Mobile mix of total Q4 room nights was mid-50% range, up from low 50% range in 2023. Genius loyalty program: mix of Booking.com room nights booked by travelers in higher tiers (Levels 2 and 3) was mid-50% range in 2024, increasing YOY. Airline ticket bookings across platforms in 2024: almost 50 million tickets (+38% YOY) with gross bookings value of $13.1 billion. Merchant gross bookings mix at Booking.com reached 59% of total gross bookings in 2024, an increase of about 9 percentage points YOY.

• First quarter 2025: Expect comparison to extra day in Feb 2024 to be ~1 percentage point headwind to growth rates. Calendar shift of Easter from Mar 2024 to Apr 2025 to be small tailwind to room nights/gross bookings growth and larger headwind to revenue/profitability growth. Expect first quarter room night growth 5%-7%, gross bookings increase 5%-7%, revenue growth 2%-4%, adjusted EBITDA between ~$800 million and $850 million. • Full year 2025: Targeting full year constant currency growth rates to reach long term growth ambition of at least 8% growth for gross bookings and revenue and 15% growth for adjusted earnings per share. Expect changes in FX to impact reported growth rates by ~3 percentage points for gross bookings and revenue and ~3.5 percentage points for adjusted EBITDA and adjusted EPS. Expect adjusted EBITDA to grow a couple of percentage points faster than revenue and on constant currency basis to increase low double digits. Expect to continue to expand adjusted EBITDA margins in 2025 and deliver margin growth slightly below 100 basis points. Expect full year adjusted EPS to grow low double digits and on constant currency basis to grow mid-teens. CapEx expected to be about 2% of revenue similar to 2024. Transformation program expected to ultimately produce annual run rate cost reductions of approximately $400 million to $450 million versus 2024 expense base, with majority of savings realized after 2025. Embedded in full year 2025 guidance is about $150 million in cost savings related to transformation program, majority in variable cost. Reinvesting about $170 million above baseline investments in 2025 to support strategic priorities.

• Competition from agentic platforms: Concerns about potential disintermediation, but Booking Holdings believes its ability to evolve, access to data, resources, and trusted brand will help it maintain position. Also, developers of large language models may partner with Booking Holdings due to economic argument of sound returns on CapEx. • Impact of AI partnerships on traffic mix: Concerns about larger percentage of travelers using other products instead of Booking Holdings, but Booking Holdings believes there will be ways for multiple players to do well, and its trusted brand and data advantage will help in discussions with other players. • Seasonal and calendar impacts: First quarter has historically been seasonally lowest EBITDA quarter, and calendar shifts (like Easter) can impact growth rates.

Q: How to contextualize risks associated with greater competition from agentic platforms?

A: Booking Holdings has evolved over time and believes it can adapt. It has data, resources, and a trusted brand. Also, developers of large language models may partner due to economic argument.

Q: On alternative accommodations, where are biggest contributions and regions to invest in 2025?

A: Higher growth in all regions compared to traditional accommodations. Growth is due to great supply proposition, ability to compare traditional and alternative accommodations on platform, and traveler preference for combined options.

Q: Talk about airline growth going forward and operator experience.

A: Excited about airline growth trend, but growth won't be linear. Focus on providing better service and integrating into connected trip. Operator experience is very early, not disclosing economics yet.

Q: Thoughts on partnering with other players and risk of impact on traffic mix?

A: Aware of the issue, but believe there will be ways for multiple players to do well. Booking Holdings has trusted brand, data, and resources. Also, multiple agents may create cost of acquisition advantage.

Q: Updated thoughts on M&A?

A: Don't discuss M&A except when having a transaction to discuss.

Q: Ad costs and leverage, direct traffic, brand spend?

A: Expect marketing leverage to continue in 2025 due to more direct traffic, higher performance marketing ROIs, and investment in social media channels with attractive incremental ROIs.

Q: Thoughts on AI impact on top and bottom line?

A: Cost avoidance benefits are already seen in areas like customer service and coding efficiencies. Revenue impact will be slower but huge. Already seeing benefits in sales and other expenses as a percentage of gross bookings.

Q: Merchant mix shift and room nights?

A: Merchant mix shift helps in achieving connected trip vision, providing more payment options and benefits. First quarter room night growth guidance 5%-7% due to factors like easier comps in Q4 2024 and leap year impact, but normalized growth is low double digits.