Tripadvisor, Inc. (NASDAQ:TRIP) Q4 2023 Earnings Call Transcript

Tripadvisor, Inc. (NASDAQ:TRIP) Q4 2023 Earnings Call Transcript February 15, 2024

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Operator: Good day, and thank you for standing by. Welcome to the Tripadvisor Fourth Quarter 2023 Conference Call. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Angela White, VP of IR.

Angela White: Thank you, Josh. Good morning, everyone, and welcome to Tripadvisor’s Fourth Quarter and Full Year 2023 Financial Results Call. Joining me today are Matt Goldberg, President and CEO; and Mike Noonan, CFO. Last night after market close, we filed and made available our earnings release. In that release, you’ll find reconciliations of non-GAAP financial measures to the most comparable GAAP measure discussed on this call. Before we begin, I’d like to remind you that this call may contain estimates and other forward-looking statements that represent management’s views as of today, February 15, 2024. The Tripadvisor disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our earnings release as well as our filings with the SEC for information concerning factors that could cause actual results to differ materially from these forward-looking statements. With that, I’ll turn the call over to Matt.

Matthew Goldberg: Thanks, Angela, and good morning, everyone. Before I begin, I’d like to address the press release we filed on Monday. We announced that our Board of Directors has formed a special committee to evaluate any proposals resulting from Liberty Tripadvisor Holdings’ stated intention to engage in discussions with respect to a potential transaction. We appreciate your understanding that we won’t address any questions on this topic today or provide further updates unless we have something definitive to share. Now I’d like to address our performance. We were pleased to exit the year with results that exceeded our expectations. Q4 revenue was $390 million, reflecting year-over-year growth of 10%. Q4 adjusted EBITDA was $84 million, 22% of revenue, exceeding expectations due to revenue outperformance at brand Tripadvisor and marketing efficiencies at both Brand Tripadvisor and Viator.

For the full year, consolidated revenue grew by 20% to an all-time high of $1.8 billion and adjusted EBITDA grew 13% to $334 million. Last year, we made meaningful progress executing against our strategic priorities. We reinforced our market leadership position at Viator while sharpening our focus on smart user acquisition. Viator also finished the year at breakeven profitability, achieving the full year milestone a year earlier than anticipated. At Brand Tripadvisor, we invested in our strategy and delivered promising early proof points while maintaining financial discipline. Finally, at the fork, we delivered revenue gains while significantly improving our profit margin through disciplined cost management and exited the year at breakeven for Q4.

Our results also reflect how we’re building a stronger, more diversified and defensible position in the large and growing global travel and experiences industry. We have a unique and leading position in the high-growth experiences category, given the breadth of Tripadvisor and the depth of Viator. Within brand Tripadvisor experiences, along with other partner offerings beyond our legacy Hotel meta offering, are now contributing almost half of the revenue versus less than 1/3 in 2015, reflecting our ability to diversify our monetization and reduce dependence on Hotel Meta revenue. And across the group portfolio, Viator and TheFork have grown to nearly 50% of our revenue in 2023 versus less than 10% in 2015. And they’ve each reached the scale to deliver increasing profitability.

Let me highlight our accomplishments and look ahead to 2024 priorities for each segment. At Brand Tripadvisor, we kicked off 2023 and by introducing a multiyear strategic vision that focuses on delivering world-class guidance products to deepen engagement with our audience and fuel diverse monetization paths. Over the course of the year, we delivered tangible progress through product innovation. We relaunched our Trips tool for creating itineraries and integrated generative AI deeply into the user experience. I previously cited a few proof points that demonstrate the impact and we’re pleased that each of these has continued to improve over time. First, the average revenue per Trips user shortly after launch was 3x higher than the average member.

That has now increased to closer to 5x and our average member already monetizes at approximately 10x the rate of the average nonmember. Second, we saw a 100% increase in the number of daily users who generated and saved an itinerary, specifically with AI in the back half of the year with limited marketing efforts and the majority are now engaging with this tool in our app. Finally, we continue to see growth in the return rates for Trip users whose repeat rates are meaningfully higher than users who don’t use the tool. During the year, we also introduced generative AI-driven hotel review summaries, an important example of how we’re uniquely positioned to use technology to draw differentiated insights from our proprietary database of quality content and behavioral data.

Across the 30,000-plus hotels where this is currently available, we’re seeing early but strong positive indicators. User satisfaction scores are nearly 75%, which is even higher than the strong initial scores for our Trips feature at launch. We continue to bring more travelers to our Experiences pages. In 2023, 180 million more travelers used Tripadvisor to shop for Experiences than in 2022. As a result, we drove revenue growth rates higher than any other category in the segment at approximately 45%. Importantly, this strong demand reflects the opportunity we have to match additional supply, adding relevant new inventory and partners across geographies and categories, representing meaningful upside for Experiences on Tripadvisor. 2024 will be a year of acceleration for brand Tripadvisor.

Here are a few of our priorities. First, we’ll deliver a differentiated experience in the mobile app. To put it simply, our existing app users are more engaged and more valuable than users on other services — surfaces. They account for a relatively small percent of our total MAUs, but a disproportionate number of reviews and trips created at 30% and over 60%, respectively. Our aim is to deliver an essential app for travelers that convinces more of our audience to download and use the app as the best end-to-end trip companion powered by AI. Second, will begin to shift our marketing in support of our engagement-led strategy. Historically, we’ve optimized everything from our paid search spend to CRM to drive immediate click and display led revenue.

With the progress we’ve made against our product, we now have the opportunity to target higher-value audiences more directly and drive more users to sign up and sign in as members to download our app and to begin planning a trip because we know each of these behaviors is orders of magnitude more valuable to us than same-session clicks. Finally, we’ll leverage the investments we’ve made in data and AI to deliver a more personalized experience for our users, particularly our highly engaged members. This starts with recognizing them for their contributions to our community and extends to broader benefits and rewards we can offer through our free membership program. It also includes new ways to engage with our product, including on AI-driven conversational search experience and iterative Trip planning capabilities that better integrate commerce opportunities by helping travelers find the right hotel, experience or restaurant to round out their itinerary.

Next, at Viator, in 2023, we made significant progress to reinforce our leadership position in experiences by investing and improving our product for both travelers and operators and continuing to drive our scale. This year was an impressive year of revenue growth at 49%, bringing Viator revenue to 41% of total group revenue. GBV grew to over 40% to more than $3.7 billion, and we also reached breakeven profitability for the full year earlier than anticipated. This milestone reflects the power of the model and the operating cost leverage our lean fixed cost structure affords. On the demand side, we optimized our brand campaign, growing our awareness and reinforcing our position as the most well-known experiences brand in the U.S. We made improvements across nearly every part of the shopping experience on every surface.

We’ve enhanced our sort for better discoverability, matured the app and grew its share of bookings and improved the post-booking experience across the board. These and other updates contributed to double-digit growth in conversion across the business. Our new rewards program, meanwhile, is driving value for customers. The early proof points drove mid-teens improvement in retention for travelers using the program. And our most loyal users are our fastest-growing customer segment. They’re more likely to come through unpaid and immediately profitable channels and spend more than first-time users, driving improvement in our unit economics. For operators, we launched our latest version of the marketing program, Accelerate. We consulted more than 5,000 operators in its creation, and this consideration shows in the results.

Well over 50% of eligible products participate in the program, which contributes — which continues to support our healthy take rate. With the largest product inventory and supply base available anywhere, the value we are driving for operators is clear. Churn rates are low and supplier and product counts are steadily increasing. In Viator, in 2024, we remain focused on growing our scale, balancing growth, profitability and market share as the global market leader in experiences. With an eye on profitable growth, we expect to drive improvements in unit economics through a combination of initiatives focused on lowering customer acquisition costs, increasing retention and enhancing lifetime value. On the demand side, our focus is on an improved experience along the customer journey from first-time interaction to long-standing returning customers.

These are unique experiences for most travelers, so it’s important that at first interaction, we begin to build our relationship of trust and value so they return back to book their next memorable experience. We’ll do this by leveraging our group customer data platform and delivering a more robust personalized experience for travelers. We’ll also continue to focus on enhancing our app value proposition. We know that app users convert to bookers at a rate higher than desktop or mobile web users, so we’ll continue to emphasize app engagement opportunities. We’ll also continue to optimize marketing spend and our overall channel strategy, focused on acquiring the highest intent customers and continuing to drive awareness. We expect to see improvement in unit economics as our multichannel marketing investments gain traction.

On the operator side, we’ll continue to drive value through programs aimed at helping operators increase their exposure through features such as incremental performance tracking and insights. The combination of work to enhance the experience for both sides of the marketplace should help operators continue to see value and remain loyal over time. Finally, at TheFork in 2023, we began the transition to deliver profitable growth, leveraging past investments and improving our unit economics while maintaining our leadership position in dining in Europe. We grew revenue 19% in constant currency and also delivered significant margin improvement of 22 percentage points, a swing of $25 million in EBITDA as a result of disciplined cost management. During 2023, we continue to rationalize our footprint to focus on priority European markets, modernized our technology platform to drive speed of product innovation and launch new products and services for both diners and restaurant partners.

The team shipped more features in the last 6 months than they had in the previous 6 years, resulting in a stronger value proposition for both sides of the marketplace. For diners, we focused on improving the app user experience, resulting in higher conversion rates, where 75% of our bookings are made. For restaurants, we stabilized churn and drove more than 20% growth in B2B revenue and new restaurant signatures by migrating our ERB to a single platform, introducing new features for payments and yield management and improving our sales efficiency. At TheFork, in 2024, we’ll continue to make steady transition to annual profitable growth by focusing on our largest opportunity markets, marketing efficiency, sales productivity and product-led innovation.

We’ll evolve our marketing strategy to increase our efforts around repeat diners while taking a measured approach to brand investments in prioritized markets. For diners, we will focus on driving app-based engagement and conversion through quality content, personalization, recommendations and incentives to return. For restaurants, we’ll focus on value-add ERB features, value-based pricing options, revenue management features and the ability to market special offers to our growing base of high-intent diners. We expect our combined initiatives to drive growth in our average revenue per restaurant and continue to improve our unit economics as we leverage the benefit of a streamlined cost base. To close, we’re motivated by our progress in 2023, and we believe that our strategies are delivering results.

In 2024, we’ll continue to pursue a disciplined financial profile with investment for longer-term growth and transformation across the portfolio. We believe that travel has a sustainable long-term growth path ahead. In 2023, we saw healthy underlying demand despite the backdrop of macro uncertainty, which is testament to consumers prioritizing travel over other discretionary categories. Our traveler surveys reflect steady travel and spending intent in 2024 with a focus on Experiences as a central component. We believe this puts TripAdvisor Group in an advantaged position as we build on our vision to be the world’s most trusted source for travel and experiences. And now I’ll turn the call over to Mike.

Michael Noonan: Thank you, Matt, and good morning, everyone. I’ll start by reviewing our Q4 and full year 2023 performance, and then I’ll provide high-level thoughts on 2024. All growth rates for 2023 are relative to the comparable period in 2022, unless otherwise indicated. Q4 consolidated revenue was $390 million, reflecting growth of 10% or 8% on a constant currency basis. Adjusted EBITDA was $84 million or 22% of revenue and 10 percentage points higher than last year. Consolidated performance was higher than our expectations, primarily due to a more favorable traffic mix at brand Tripadvisor and disciplined marketing spend at Viator. Turning to segment performance for the quarter, brand Tripadvisor delivered revenue of $218 million, approximately flat year-over-year.

Revenue in branded hotels was $135 million, a decline of 4%, driven by a low single-digit decline in Hotel Meta and flat to slightly down performance in Hotel B2B. Hotel Meta performance was driven by sustained pricing strength in both free and paid channels, which was offset by lower click volumes, primarily in paid channels as we continue to manage these channels for profitability by maintaining consistent ROAS targets. From a revenue perspective, growth in Hotel Meta in the U.S. and Rest of World was flat to slightly up, while EMEA declined in line with prior quarters. Importantly, revenue from free channels remained stable. As a result, Hotel Meta contribution profit margin was slightly higher year-over-year. Media and advertising revenue grew 6% to $35 million.

Growth in the quarter was more normalized, but a sequential step-down that we expected, primarily due to the recovery pattern in the broader media and advertising sector. Experiences and Dining revenue grew 12% to $38 million, with experiences revenue growing approximately 20% in the midst of a challenging macro environment. Dining revenue slightly declined as we continued realigning our sales model in our B2B business as discussed on our last call. Other revenue was flat year-over-year at $10 million. Growth in crews was 10% in the quarter, offset by sustained revenue pressure in our remaining category offerings due to our strategic deemphasis. Adjusted EBITDA in the brand Tripadvisor segment was $69 million or 32% of revenue. Adjusted EBITDA margin improved by approximately 325 bps year-over-year due to strong revenue performance in our free channels as well as leverage in headcount and other fixed costs.

Turning now to Viator. Q4 revenue was $161 million, reflecting growth of 27% or 25% on a constant currency basis. Gross booking value, or GBV, grew 20% to approximately $720 million, driven primarily by volume growth. The GBV and booking growth performance in the quarter was impacted by the onset of the Middle East conflict and its effects in other European destinations where travel advisory warnings were issued. We also drove some marketing efficiencies in the quarter that impacted GBV and booking growth. In Q4, GBV growth from repeat travelers substantially outpaced GBV growth from new travelers. Compared to our new travelers, our repeat travelers book more items per trip, they buy more expensive products, and they have higher propensity to repeat with us, all of which gives us growing confidence that our efforts increasing scale and growing travel lifetime value are working.

We will also continue to focus on acquiring large new traveler cohorts given the attractive size of the market opportunity and our track record of converting new travelers to repeat travelers over time. We will do so with a disciplined approach, responding to the quality of traffic we observe and remain flexible as we move through the year. Adjusted EBITDA at Viator is $15 million or 9% of revenue, a significant margin improvement year-over-year largely due to the profitability of flow-through from the aforementioned GBV mix in the quarter. As we have discussed in prior calls, Viator’s profitability is impacted by the size and mix of new traveler acquisition. As future growth becomes increasingly driven by repeat bookers, we expect to see attractive and sustainable margin flow-through driven by these large and growing repeat cohorts.

At TheFork, Q4 revenue was $39 million, reflecting growth of 18% and 10% on a constant currency basis. Revenue growth was driven by a balanced mix of both volume and pricing. Adjusted EBITDA was breakeven in the quarter, an improvement of $15 million year-over-year, which was driven by continued focus on improving unit economics on both the supply and demand side of the marketplace and prudent cost control. We are very pleased with the work the teams have done over the year to position this segment for profitable growth in 2024. Now turning to consolidated expenses for the quarter. Cost of revenue delevered modestly due to increased direct costs related to certain media campaigns and cloud migration-related expenses at brand Tripadvisor as well as the increased mix of Viator related costs as a percent of consolidated revenues.

Sales and marketing costs as a percent of revenue were approximately 900 basis points lower, driven by more efficient marketing spend across each brand, most notably at brand Tripadvisor and TheFork as well as lower people costs across the brands. Technology and content costs as a percent of revenue were flat as investments in data and engineering resources in brand Tripadvisor and Viator remained in line with revenue growth. G&A expenses as a percent of revenue were approximately 400 basis points lower as a result of the cost savings actions we implemented at brand Tripadvisor and TheFork as well as the $8 million loss incurred in Q4 of 2024 related to a targeted payment fraud scheme, which did not reoccur in 2023 and accounted for half of the year-over-year leverage.

During the quarter, we also incurred approximately $4 million in restructuring expenses related to the previously announced actions we implemented at both brand Tripadvisor and TheFork. Now on to our cash and liquidity position. Operating cash flow was a deficit of $19 million and free cash flow was a deficit of $35 million, driven by normal seasonal trends in deferred merchant payables at Viator. During the quarter, we repurchased approximately 1.3 million shares at an average cost of $18.85 per share, totaling approximately $25 million under our current share repurchase program. Turning now to our full year performance. Consolidated revenue grew 20% to $1.8 billion. As a reminder, year-over-year growth in the first quarter of the year benefited from an easier comparable.

On a segment basis, brand Tripadvisor grew 7% to $1 billion, while Viator grew 49% to $737 million, and TheFork grew 22% to $154 million. Consolidated adjusted EBITDA for the full year was $334 million or 19% of revenue or 100 basis points lower than ’22 adjusted EBITDA margin. Sales and marketing and G&A costs as a percent of revenue were flat, while cost of revenue and technology and content slightly increased as a percent of revenue. Turning to segment EBITDA for the year. Brand Tripadvisor delivered $348 million in adjusted EBITDA or 34% of revenue. For the year, a combination of investment in data and engineering headcount, higher cost of revenue in media and advertising and higher cloud migration costs as a percent of revenue drove the approximately 200 basis point decline year-over-year.

Viator adjusted EBITDA was breakeven for the full year, which was a 200 basis point improvement from last year with increased leverage from people costs and direct marketing costs, which includes both traffic and brand. Finally, at TheFork, we saw a significant EBITDA improvement in 2023, moving to a loss of $14 million versus a loss of $39 million in 2022. The largest driver of this improvement was in sales and marketing with lower spend in performance and brand marketing as well as increased leverage from sales headcount. This was especially impressive given the COVID subsidy benefit of $11 million received in 2022. Total operating cash flow for the year was $235 million and free cash flow was $172 million. We repurchased a total of 6 million shares this year at an average price of $16.51, totaling $100 million.

In light of the announcement earlier in the week, for the time being, we’ve suspended our share repurchase program. We ended the quarter and year with approximately $1.1 billion in cash and equivalents. As we discussed throughout the year, fiscal ’23 operating cash flow and free cash flow were impacted by a net cash outflow of $64 million related to our previously disclosed settlements with the IRS for income tax returns for the years 2009 through 2011. In 2024, we expect a net cash outflow of approximately $80 million to $130 million related to the settlement for the years 2014 to 2016, resulting in an estimated increase in tax expense of approximately $30 million to $60 million, which we’ll take in Q1. Now on to thoughts for 2024. In light of the formation of the special committee and evaluation of potential alternatives, we will not be providing a detailed outlook on this call.

However, we will provide a framework as to how we are thinking about our priorities for the year. We will continue to invest and operate the brands in a way that strengthens and builds their long-term sustainable competitive advantage. We will do this against a backdrop of what we believe to be a healthy travel market, although we expect to see some normalization across travel this year versus last year. As such, we expect to see some tougher comparisons this year, particularly in Q1, where we expect to see the lowest growth quarter of the year across the segments. At brand Tripadvisor, our priority is the long-term diversification of the portfolio. As we have said since launching our new strategy last year, we expect this to be a multiyear transformation, supporting sustainable future revenue and profit growth.

We are aiming for stable revenue dollars for the year while continue to maintain flexibility for investment in our transformation. At Viator, our financial profile will reflect a balance between growth, profitability and market share gains. Combined with some normalization of travel growth, we expect a step down in revenue growth for the year relative to where we exited 2023. We continue to expect Viator to be profitable for the full year. At TheFork, we expect much of the groundwork we laid in 2023 will benefit us in 2024 as we continue to operate with more leverage and efficiency. Our balanced growth and profitability strategy is expected to result in a step down in growth from 2023 levels, but achieved full year profitability. With that, I’d like to turn the call back over to the operator and begin Q&A.

Operator: [Operator Instructions]. Our first question comes from Ben Miller with Goldman Sachs.

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Q&A Session

Benjamin Miller: We’ve talked a lot about the importance of mobile and app base logged in users. Anything you can share just on the top of funnel traffic and engagement you’re seeing from that cohort? And anything on conversion of non-app non-logged-in members to members?

Matthew Goldberg: So obviously, each of our segments, Ben — thanks for the question, has a different combination. I mentioned that 75% at TheFork are booking with us on the mobile app. Of course, we put a real focus on the app at Viator and are seeing increasing size of those audiences, and they’re engaging further. We’re putting this focus on Tripadvisor in a way that we really haven’t in a while. I think I mentioned on one of our calls previously that we had refreshed the tech stack. It was modern and ready to go. And really, as we think about shifting to a mobile-first approach, we want that app to be an indispensable experience for travelers. And the way that we’re going to do this is we’re going to make sure we give good incentives to sign in and log in, which is something that we have already done at scale.

We have more than 130 million members and then to convert them to download the app and engage there. And so what will wind up happening is they’ll wind up spending time in the app. There will be — it will feel like a closed experience where you can leverage AI to understand what your opportunities are as you’re planning and what’s around you when you’re in destination. We think that will drive meaningful engagement. And then, of course, we will focus on how that converts through the funnel. Those numbers, I don’t think we put mobile app users out publicly in the past, so I don’t intend to do that here. But we think that when you look at the overall percentage of our total audience, there is significant headroom to drive people into the app.

And then we think that once they’re in the app, we know that the value to us is many, many multiples of what they would be in a web-based experience. So I think without disclosing further detail that we haven’t done in the past, I think you get a sense that our strategy across the board is to drive direct users into the app, engage them deeply, give them an experience that not only is trusted, high quality. But then when they go and have that experience in the real world, it’s only natural to come back to the app and, of course, pay it forward to other travelers by sharing their experience.

Operator: Our next question comes from Naved Khan with B. Riley Securities.

Naved Khan: Maybe just a high-level question for you, Matt. How does the formation of the special committee by the Board affect timing for a potential spin-off of Viator? And then secondarily, maybe just on Viator margins for 2024. How should we think about the scope for improvement there? Should we look at Q4 as a proxy in terms of the year-on-year gain? And how that might continue into ’24? Just give us your high level thoughts there.

Matthew Goldberg: Yes, thanks, Naved. Appreciate the question. I’ll take the first, and I know Mike will take the second. Since I joined the company, of course, this notion of a spin-off of Viator has just not been something that we’ve spent a lot of time and energy on given the markets that we’ve been in. We’ve been focused on the business. And I think you can see that our focus on the traveler, the experiences they have with us and the way that our product delivers over and over for them again has really shown itself to prove out in the results that we’ve seen to date. And that remains true. We’re totally focused on the business. The announcement this week doesn’t change that. I’m focused on moving things forward and focused on our strategies, which I think are clear and really delivering. And I know that our teams are doing the same. Mike?

Michael Noonan: Naved, on your second question, again, avoiding kind of specific guidance as for my earlier commentary. Listen, I think we — and this is the statement we’ve made consistently in the past, we are, I think, on a path to seeing Viator move in direction of its long-term potential margins, right, which we’ve talked about. I’m not going to peg next year to what we’re thinking — what happened in Q4 other than to say that’s the broad trajectory we’d expect the business to pursue. Secondly, I would say, and this will reflect in some of my comments, we’re going to be supple as we think about this. We’re going to be prudent and disciplined as we think about our marketing investment that means we want to pursue high-quality traffic.

That means we’re not going to pursue lower quality traffic, right? So really have a disciplined approach and be nimble as we move through the year. So again, I would just say we want this business to be on that trajectory, on that arc for what we believe achieving long-term margin potential over the near term.

Operator: Our next question comes from Richard Clarke with Bernstein.

Richard Clarke: If I can maybe just ask that previous question a slightly different way. If I look at Q4 at Viator, you made a $34 million of additional revenue year-on-year, $18 million of additional EBITDA. So that’s like a contribution margin of 53%. I mean is that what’s achievable on growth? Or is there anything else that’s gone into that big improvement? Is that now the unit economics? And then maybe just secondly, I guess, Expedia last week talking about leaning back in and maybe spending a bit more on marketing. Are you seeing any benefit of that? Is any of that

Michael Noonan: Great, thanks, Richard. I’ll take those. I think I heard the last question is a little light, but we can come back to that in a second. So just on Q4, let’s be clear, like we — Q4 was a tough quarter from a macro perspective. We have a lot of things kind of happening as we said, with the Mideast conflict, certainly brought some headwinds to the market. We also were very much in discipline in terms of thinking about how we want to acquire new users, right? And getting back to the comment I just made, really targeting high-quality traffic and being maybe a bit more discerning. So both those impacts really affected new user growth, right? And so you saw really come through, I think, the power or the model, which is large repeat cohorts, more prominently providing revenue there.

So I think Q4 was a bit more of — and I’ll point — and I’ll also point to, Richard, we had revenue of 27% growth, but GBV growth was 20%, right? So there’s a difference there and some timing — rev rec timing differences there that you should just maybe just read through that incremental margin. But it’s really more of an impact of we saw the flow-through from lower new user acquisition due to some of the macro and marketing discipline we had in the quarter versus the flow-through of EBITDA from the repeat cohorts. And then the second question…

Matthew Goldberg: It was around Expedia, and maybe I’ll lead off and — look, we obviously don’t comment on particular participants in the auction. But clearly, the bidding dynamics are healthy. I’ve said in the past, we take those relationships quite seriously. And so we spend a lot of time working with our partners to make sure that we are optimizing the way that we can deliver for their marketing objectives. And I think as Expedia makes an announcement like that and others respond, I think you can expect that, that’s something we will look to take advantage of, but the bidding dynamics are healthy.

Operator: Our next question comes from Doug Anmuth with JPMorgan.

Dae Lee: This is Dae Lee on for Doug. I had two. First one, I think Mike, you said you’re expecting stable revenue dollars at brand Trip. If that’s true, could you talk about what’s affecting that outlook? And then secondly, you guys saw very strong leverage out of sales and marketing in 4Q. And it sounds like you face greater emphasis on higher value users. [indiscernible] there any else to call out on that marketing efficiency in 4Q? And looking ahead to 2024, should we expect marketing to be a social leverage?

Michael Noonan: Yes. I mean as you broke up a little bit, let me try to parse through it. I think your first question was around stable revenue at core? Again, I wouldn’t show what your specific question was. I would just say that we want to stay away and understand away from specific guidance. And we want to be — give you some view of the shape of how we’re thinking about the year but did want to stay away from any specific guidance due to the recent announcements.

Matthew Goldberg: Secondly, the only color I would give on that to you, Doug, is that you can imagine, we’ve talked from the beginning about a multiyear strategy to transform a business. And when you do that, you’re focusing on diversifying your revenues. And I think we are very pleased with how that diversification is going. I tried to reinforce that in my comments upfront. We see replacement dollars from categories that are growing very quickly. And of course, we’re all familiar with the secular challenges in some of our revenue streams. So when you balance all that, that sort of comes together in that kind of a shape. It’s what we expected, and we feel like we’re making really good progress. And the second question was around marketing dollars and whether we’ll see…

Angela White: Can you repeat that?

Matthew Goldberg: Yes, why don’t you repeat the second question because we are not sure we got that one.

Dae Lee: Yes, sorry. Second one was on marketing leverage that you saw in 4Q. It sounds like you guys placed greater emphasis on higher-quality users, but wondering if there’s anything else to call out on the efficiency you saw in 4Q and if we should expect marketing to be a source of leverage in 2024?

Matthew Goldberg: And again, are you referring to Viator in your comment?

Dae Lee: I mean total sales and marketing, you guys saw a very strong leverage. It sounds like you guys saw that across brand Trip and Viator so just across both platforms.

Michael Noonan: Yes. Yes. So just to unpack on both platforms, I think the leverage is really across brand Tripadvisor and Viator. I already talked about Viator on the last answer. Brand Tripadvisor, we just saw a very healthy free channel mix in the quarter. That very much impacts that leverage result. Just credit to the teams at brand Tripadvisor who really work every day on optimizing all our channels, but particularly on the free channels, whether it’s CRM, SEO, or other direct channels. We continue to see good results there. We saw a nice pricing versus our expectations and certainly good pricing on a year-over-year basis. That certainly was the driving factor at brand Tripadvisor. All the teams are focused on how we continue to drive that forward.

As you know, when you think about that, that was in both — just to clarify, that was in both Hotel Meta as well as our experiences business. These are things that the teams will continue to drive into next year, very dynamic markets, both in the free and paid markets, particularly with how we advertise in the paid markets and — as well as in the free channels, but they will be working hard to continue to advance the ball next year.